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On a PC with external speakers and also a headset with microphone. Windows XP is configured so that standard audio are external speakers and standard microphone is the headset. Skype is configured to use the headset for audio in and out.
This way one can listen to sound from the PC and from MP3 players through external speakers and if there is a call to make or take, this is going through the headset.
But now there is the problem that the noise level for the headset is too low. Increasing volume has no effect on the headset, it only affects the external speaker's volume.
Now the solution: Going to the control panel and opening the sound setting, go to the audio tab. The external speakers are selected as default. Just temporarily select the headset and then click on volume just below. You can now set the volume for the headset, click OK and click cancel (!!!) on the sound control dialog box. This way the external speakers remain as default output.
Skype-->Tools -> Options -->Sound Devices-->audio device/USB/etc Audio Device (do NOT use windows default device)
You can also tick the ring pc speaker check box as this is a good backup to alert you even
if the main speakers are off or turned down.
Start-->Control panel-->Sound and Audio devices
On the audio tab set the default playback device to your main soundcard(AC97/Audio-chip/add-on-adapter), etc.
Your installed audio device must be present there.
If not, reinstall audio device