I have the same problem like everyone else, I have just upgraded to Win 7(32 bit) was on Vista(32bit) previously but I never encountered the problem as I was using an AMP for my sound so used audio leads.
I have a LCD Samsung (as my default monitor with no other monitor) which i have connected through HDMI cable, the picture is great the sound is no there! I have the ATI HD 3400 like you, and i was up all night installing about a million drivers
from various posts and none of them have worked!
If i right click on sounds on the bottom right hand corner and click on playback devices i can see (1) speakers 2x HD audio device & (2) Digital Video (HDMI) and it says not plugged in! if i right click to set as default that option is greyed out!
you said you installed the vista one, did you uninstall the previous driver
first? did you have to do anything else?