It sounds like a driver issue, SKA - like the driver is trying to use a sample rate that isn't supported by your sound card.

Unless I'm missing something, the issue doesn't have a thing to do with your board - you seem to be doing that right. You'll get better results with the synth using the line in rather than the mic, which has a rather hot and not particularly clean preamp.

Can you just plug a regular mic in and have it work? My guess is not. Try opening up the Sound section of your control panel, (sorry - I don't know anything about Vista,) and seeing what options are available there as far as bit depth and sample rate.

If you don't get a good answer here, you might try posting at audiominds.com - there's guys over there who live and breathe this stuff and would be quite pleased to assist.

Good luck!