Just built my own rig last week and installed Windows 7. I am using a Fatal1ty gaming headset (non USB) and when I have the microphone plugged into the headset it does not work at all. However if I unplug my microphone from the headset and plug it into the computer directly it works just fine. Obviously not ideal because its way to far away, sounds bad that far away and it looks odd just having a microphone sticking out of my computer. When I go to the Recording tab under sounds I have the Microphone icon with a green check next to it and then Line in (not plugged in) and Stereo Mix (ready). Any suggestions?
The microphone needs to "reach" the motherboard one way or another. If you plug it in the headset, then there has to be a headset connector to be plugged in the mobo to carry the signal. Make sure the headset is correctly connected to the mobo.