I had this problem. I solved it.
(I have an AC'97 front panel and an ASRock M3A790GXH/128M with ALC890 onboard sound. Running Windows 7 Ultimate 64 bit).
The problem is that the front panel audio is AC'97 spec whilst the motherboard is HD Audio spec. The AC'97 connector from the front panel as a result lacks two presence sensing wires (PRESENCE and J_SENSE) for each of the mic and headphone ports.
Port specs compared: Desktop Boards — Front panel audio header pinouts
The motherboard manual said to set front panel audio in BIOS to "ENABLED". That option must have been out of date, because it only had AUTO or DISABLED. So AUTO was naturally the right option.
The manual also said in (CONTROL PANEL > SOUND > Realtek HD Audio Manager) to click the Folder or Spanner icon just under "Advanced Settings". Then to select "Disable Front Panel Jack Detection". This folder/spanner icon was not there on my computer, no matter if I tried the latest drivers or a whole range of older drivers. However, it apparently did not matter - perhaps that option is now deprecated.
NB: There is no option to select an AC'97 front panel in my BIOS (as such I think it auto determines this based on the wires connected - see below). The solution was:
1) Install latest drivers from Realtek website (older ones worked too, but best make sure you're up to date).
2) NOT to use the connector block to connect the front panel wiring to the motherboard. Instead to use the individual jumper wires to connect only 5 pins. (My case wiring had the block as a unit with all wires connected and also separate jumpers for each wire coming out the back of the block). This is the KEY point of this solution!
On the case connector, DO NOT connect the two wires called RET-R and RET-L. On the motherboard connector, the corresponding ports not connected were called MIC_RET and OUT_RET (your motherboard manual should have a diagram). These appear to make the motherboard think it is connected to an HD Audio front panel, but as the two PRESENCE wires are not present from an AC'97 front panel, the computer will never think anything is plugged into the jacks and so not send/receive sound from them. Without the two RET wires plugged in, it appears to instead assume that it is dealing with an AC'97 front panel and the two jacks are permanently active. (As a result, unlike if you had an HD Audio front panel, the rear jacks aren't muted when using the front jacks - but I can live with this).
Hope this helps some people (I signed up only to post this).