Very very interesting results, the fact it isn't working in Safe Mode shows some thing's awesome is happening. Here's a check that could be tried, you want to check your Device Manager as I believe it has not been mentioned yet, whether you've checked it or not or know how I do not know. For Windows Vista/7 just use the search function in the start menu: Device Manager
Windows XP, right click My computer and click Propertires, and then click the Hardware Tab.
In Device Manager you want to assure there's no errors, the
EASIEST way to do this just look for a "!". By default if there IS any errors it will show you them instantly, so if you see none without expanding the options then there's no errors. Next check is the sound. In the "Sound" tab, expand it and open it then goto the "Driver" tab. Click the "Update Driver" button and follow what ever steps you are presented. If nothing works, the next step is to click the "Uninstall" button. (Don't worry simple re-installation is the next step.)
Once you've uninstalled it click this button:
Then give it another test for sound.