Need help with Sound Blaster X-Fi - all playback is sent to mic

The gist of the problem is in the topic; all sounds played by the computer seems to get sent to the microphone; this understandably becomes a huge problem on vent; if I'm talking at the same time as someone else, they will hear themselves and any ingame sounds going on at the same time.

Now, I'm fairly sure I've isolated it to the sound card, because I've seen in both the Creative Console (audio creation mode) and in some Windows hardware testing program (Control Panel - Sound and... - Voice - test hardware) that when I'm having sound in the background (music etc) the level for the microphone will move, as if it's picking up sound - EVEN WHEN ALL SPEAKERS, HEADPHONES AND MICROPHONES ARE UNPLUGGED!

So I have no idea how to fix this. In the Windows Volume Panel, I've turned everything but master volume and Wave down to 0% volume and muted for playback, and have selected Microphone and dropped all other volumes to 0% in recording, so it doesn't seem to be an obvious fix like turning off "What U Hear".

I've got Windows XP Media Center Edition 2005, and everywhere in the control panel I see any reference to sound or audio devices, the sound card seems to be called either "SB X-Fi Audio [A400]" or just "Creative SB X-Fi" - But the former I can find no information on, and the latter is seemingly just the general name for the X-Fi product line. So I can't specify exactly what sound card model I have, if it's a driver issue or something; a guildmate computer engineer believes it's the Xtreme Gamer model, but I doubt it since Wikipedia says that model was released in Oct '06, but my computer is from Dec '05. Stille, the drivers he sent me to seems to work for every X-Fi model that existed at the time the computer's from, making me think it's not a driver issue.

Both me and everyone I've talked to so far are stumped. And it's a serious problem; I've been pretty much benched from GvG since it creates echo and therefore communication problems on vent.

Has anyone ever had a problem like this? Am I just a computer idiot overlooking the obvious?

Thanks,
Xei.

It could simply be a bad sound card or a bad driver. I've had problems before, trying to get drivers for an SB card - the drivers I could download from Creative either didn't work or said I had the wrong hardware. But somewhere in the drivers section of the creative site, there is some sort of option to automatically update your drivers. I don't remember the specifics, but basically, the site detects your card and updates to the proper driver. Try that - it was the only way I could get my SB Live 24-bit to work properly.

Xei;
Some X-Fi cards have a multi-function jack for the microphone. Which model of X-Fi do you have installed?

I think it's the Xtreme Music version - and I doubt that's the problem, but I wouldn't mind a walkthrough in how to check/fix that thing.

Drivers are fine according to that auto-update, too.

Hmmm... The microphone jack on the eXtream Music version of the X-Fi is a multi-function port. It is used for both the microphone and digital i/o port. From looking at the manuals, there are two possibilities; the speaker configuration and the software configuration. You said you were using head phones, they should be plugged into the third jack from the game/midi port. The microphone should be in the fourth jack from the game/midi port. All of this you should know already. The next step is to run the speaker configuration wizard, it will cover connecting the headphones but not the microphone, it must be disconnected when you are using the speaker configuration tool. Once the sofware is configured for head phones, we need to configure windows. For XP you only need to double click the speaker icon in the system tray. Make sure that "Auxilary" & "Line-In" are muted, then click the advance button under the Microphone slider. If you have a senative mic you will not need the +20db gain, the main reason we are at this window is to make sure that both sliders are disabled. If they are not, then we need to reconfigure the speakers again.

I know a lot of basic stuff, but if it isn't working after the first few waves of trouble shooting, strip everything and start over. I hope this helps.

Edit: If you have already done all of the above, uninstall the driver and the application you use to chat with in PvP. Once uninstalled use a driver cleaner (such as DriveCleaner.net) to remove the leftovers and allow you to get a good clean install from the CD. Unless you have a specific reason for needing to update the driver, don't. In spite of what many people say, updating the driver is not always a good thing.
Disconnect the microphone from the jack. Install the Driver from the CD, reinstall DirectX then test the basic audio system. If everything is working then go into the control panel and mute both Aux and Line in again. You get the idea...