Alright, the microphone works fine but when it is enabled it does some strange thing to any sound output. I noticed that dolby home theater turns off as well. Enabling it improves the sound a lot but it is not the same as if mic is off. I will summarize the situations:
I fist found out playing starcraft 2, on game start any other sound (music) gets extremely lowered despite the fact that it is all maxed from the volume mixer. Turning on dolby home theater makes it bearable but when I exit starcraft sound improves a lot.
Second I started messing with windows volume mixer and found out that the same thing happens even when I only open the "recording" tab. As soon as I go back to playback tab it is good again.
Third, skype works well, no problems there, sound remains good all time. However if I open the audio settings... yea... you know, dolby home theater turns off and sound gets extremely low.
I'm open to suggestions and will supply any additional information.
thanks