Sound Activated Recording - Not Working

I am using Audacity 2.0.3 on Windows 7. I was using the Sound Activated Recording option and it was working fine. Had a computer problem that required my profile to be re-built. Tried Audacity with the Sound Activated Recording set to on and as soon I click the record button it starts to record but I do not hear anything in my headphones. I have Windows DirectSound selected along with Primary Sound Driver and Primary Sound Capture Driver and 2 stereo input. Does not seem to work now. Am I missing something?

You may need to raise the “Sound Activation Level” :