Toshiba Sound Device Help

I recently upgraded my girlfriend's computer from Windows Vista to Windows 7 Professional (32 bit). Everything seemed to be working fine, but when she opened up Skype for the first time, she found that Skype no longer recognized her microphone. In fact, when I go to the audio manager, the microphone shows up as a device, but doesn't recognize any of the sounds I make. I was wondering what the problem is with this; is it a problem with Windows 7, is she missing a driver, or what?
The computer is a Toshiba Satellite M305-S4910. Here are the specs:


Memory*
4GB PC6400 DDR2 800MHz SDRAM

Display Size
14.1" widescreen

Display Type*
WXGA with TruBrite® Technology

Display Resolution
1280x800, Supports 720p content

Graphics Engine*
Intel® Graphics Media Accelerator 4500MHD

Graphics Memory*
128MB-1759MB dynamically allocated shared graphics memory

Hard Drive*
320GB HDD (5400rpm)

Optical Drives*
DVD-SuperMulti (+/-R double layer) with Labelflash™ drive supporting up to 11 formats

Webcam
Webcam and microphone built into LCD bezel

FM Tuner with Antenna
No FM Tuner with Antenna

Wireless LAN*
Intel® Wi-Fi Link 5100AGN (802.11a/g/n)*

Bluetooth
No Bluetooth (No Antenna)

Inputs and Controls
touch pad pointing device, Media button, CD/DVD Buttons (Play/Pause, Stop, Prev Track, Next Track), Mute button, 86 key US keyboard

LAN
10/100 Ethernet LAN
Audio

Microphone jack (mono), Headphone jack (stereo), harman/kardon® stereo speakers, Built-in microphone, S/P DIF output port (shared with headphone port)

AC Adapter
75W (19V 3.95A) Auto-sensing, 100-240V / 50-60Hz input

Battery
Li-Ion (7200mAh)

PC Express Slot
1-ExpressCard™ Slot

Media
S/P DIF output port (shared with headphone port), 5-in-1 Bridge Media Adapter

USB Ports*
1-eSATA/USB (2.0) combo port with Sleep and Charge*, 2-USB (2.0) ports with Sleep
and Charge*

iLINK
i.LINK™ IEEE-1394

Sound recording is not recognised just in Skype? Did you try to record sound in Windows(With Sound Recorder)?