Hi Dezmond, and welcome to the forums
Although WMC should work "out of the box" due to the vast range of encoding methods I've found that WMC often needs a little help,
I use the Vista Codec Pack available
Here and found that it plays all the file types I use
as for the sound output yo may want to right click on the speaker icon in the tray and select the
Playback Devices option which will allow you to fine tune your sound system.
another option to check your settings are correct is to use a different player to Payback DVD and see if it works correctly, one I can recommend is VLC have a look
Here
hope this helps