Thinkpad X201 - problem with microphone and speakers

Hi,
My thinkpad X201 is a professional computer set up with Windows XP. Although I cannot check, I am reasonably sure that the computer was installed with the latest drivers and is regularly updated to the latest SP and patches.
My problem is the following: in Volume Control window, when both the general "Volume Control" and "Mic in Volume" are un-muted and maxed-up, a feedback loop quickly builds. When I decrease the volumes of both to a lower values, I can actually hear myself speak with a slight delay. The same phenomenon can be heard if I use the internal mic or if I plug in a microphone.
So, it seems that the (internal or external) mic input is constantly sent to the speakers. This makes any recording with this computer very painful.
Did anybody experience this problem? Is there a solution?
I would greatly appreciate any feedback.
Thanks

Ok, I've fixed the Radio thing, I installed the Nvida drivers from the Nvida site, and then had to select the aux input twice. Still havn't fixed the Mic issue, any suggestions?
Thanks!

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