Vista - Something badly wrong with my out-going audio

Need some help here if possible. I vaguely recall a time when I used to use
Messenger together with a basic microphone for voice calls (which just plugs
into the microphone input jack at front or rear of my p.c. - no
software/special drivers required) and having, reportedly, good quality
audio received from me by the other party I was speaking to.
Having regained interest in using the service and now using Live Messenger
2008 (ver.8.5.1302.1018)I notice that although RECEIVED audio is very good
(brilliant in fact) my transmitted audio is almost unbearable to listen to
due to distortion. I am not certain that this occurred as result of
upgrading my messenger program or whether this has something to do with a
MOBO change my computer shop had to undertake as both occurred similar sort
of time some months back.
My p.c. is a WinXP (SP3) Compaq using Realtek HD Audio soundcard.
Have checked my device manager and see no obvious conflicts... have even
uninstalled the realtek sound card via the device manager forcing it to
reinstall itself and its drivers on next boot-up - this made no difference
(in case there was maybe a driver issue). The list of audio codecs showing
in the sounds and audio devices utility appear to present and correct (I
mention this because my problem almost sounds to me like there is a problem
with a codec somewhere...).
One thing I do notice (that may or not be significant) is that whenever I do
the hardware test for the microphone (within the sounds and audio devices
utility)- the final stage of test where you can hear your voice coming out
of the speakers simultaneously - always sounds very poor and flakey.
....oddly I seem to be able to use same microphone is same socket to make
recordings using the Windows Sound Recorder WITHOUT any distortion at all -
strange.