It's a long shot, but does LFS register in the audio mixer? Launch LFS in a window and start a race, then click on the speaker icon in the systray and click "Mixer". You'll see a window with a "Device" slider in the left section and a list of applications that are currently using the selected device. You can adjust the sound level for each application, so make sure LFS isn't muted for some reason. If LFS is not listed, try selecting a different device.