How do I get my Built-in Mic to work in Audio MIDI setup, grayed out 1

My iMac is over a month old, and the first week I had it I tried to talk on Skype with a friend. My mic wouldn't work, and after making an Apple Care appointment with a local Mac store last weekend, we found out that the iMac DOES hear me, Dictation works with my voice, but for some reason Skype won't pick me up. Another program I sometimes use is Livestream Procaster, and neither pick up audio from me, oddly though they do pick up finger tapping on the desk, which is no further away from the computer than I myself am.
I Googled this issue with Skype and I found this page:
http://community.skype.com/t5/Mac/Apple-IMAC-Internal-Microphone/td-p/305172
It shows a screen capture using Audio MIDI Setup, and I opened mine to make sure everything was in order, but my CH: 1 & 2 are both grayed out, so I can't adjust them at all.
I have a screen capture of my window as well:
And I did check to make sure that my Interal Mic is selected in Skype, Livestream Procaster, and even my iMac's System Preferences. I wonder if it has something to do with this Audio MIDI Setup. I don't actually know, but from searching for solutions, this is the only thing that doesn't seem to match up with suggestions I've found online.
Thanks guys for any help.

I'm talking with a friend, and he says I'm muffled, and he can't understand me but can hear that I'm talking. When I turn on dictation to record what I'm saying he says I come through crystal clear.
The problem is I don't know if this is a Mac issue or a Skype issue. I was going to go to Skype, but when I found that page that I linked to above, that's what lead me to believe it's a Mac issue again because I can't get my Audio MIDI Setup to match the suggestion made by the user in that link.

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