its windows, you have it selected to port out the "what you hear", or one of speaker like options. its a common win xp problem, in windows 7 i havent had this problem so not quite sure how to fix it in there but if you mess with your audio properties and under the recording tab you will figure it out eventually.
you could just disable all but the mic in the recording tab, then it would have to use the mic.
when you disable them, to make them show again just right click in the white area where the devices are listed and select "show disabled devices"