[64GTOBOY]

The only other thing I can think of is to make sure you are logged on as Administrator. If the microphone is recognized than it means that your motherboard has onboard audio, right? So technically both Playback and Recording shouldn't have anything grayed out unless it's disabled in some other control panel or something similar in registry, component services, etc.
Sorry I couldn't be more help. PS: the guy I bought my 64 from in 1982 bought it from the first owner off the San Diego naval base when he got back from V.N. in 1973. It was originally the race car of a Navy officer's wife!