something happened here with this driver. On initial install Windows 7 installed the driver just fine.... then after some play with windows, installing other programs, non audio-type but plenty of other drivers and such, the sound failed to work.
Even an uninstall or update drivers did not work of course. MS still said it had the best drivers and device was working properly. Well, no it wasnt.
I had this same sorta problem on laptop. Windows 7 only wanted to install the HD realtek drivers. That gave me no sound at all.
Eventually i tried and tested a few other drivers to find out the best one out there is the Vista_R12.zip from Realteks website. I tried the "Vista APO" driver, but it didnt work true for me, while the R12 worked without a hitch.