Well not quite "Abandon Hope". There is a little utility for resetting most of Audacity 1.2.x registry settings to safe settings.kozikowski wrote:then the Windows Registry settings may be scrambled.
Abandon Hope All Ye...
Go to http://www.gaclrecords.org.uk/audacitydl.html
Scroll to the bottom of the page and right-click over "Audacity reset Preferences .reg file for Windows". Save this .reg file to your drive, then double-click it and click "yes" when asked if you want to add the information to the Registry. Note this will reset most of your Audacity Preferences to safe default values, in addition to setting the language to English.
The other option is to try Audacity 1.3 which has many advantages over the rather old 1.2 version.
I would suggest resetting the Audacity preferences, then running Audacity without opening any VOIP programs and seeing if Audacity functions correctly. As Koz has said, VOIP applications will often take over the sound system so as to provide bidirectional audio from packet-switched networks. Unfortunately this frequently causes compatibility problems with other audio programs.