You may need to reinstall sound card drivers. Similar thing happens when they are not installed properly.

The drivers for your sound card can be downloaded from the web-site of the manufacturer. You may also have a CD/DVD with audio drivers (if it was coming with your computer or sound card). Anyway it is a good idea to try to find the latest version of audio drivers on the web-site of the manufacturer (Usually drivers can be found in the Support section of a web-site).

Also see the following thread:
Recording with Stereo mix, how do I improve the quality?