My Solution In Detail
Realtek and my computer case front panel do not work together. (Some sort of HDA compatability issue)
This solution may not work for you!
My problem generated from playing Counter Strike (CS) and whenever I use my mic it gets extremely staticky, fuzzy, and other players hear it as a loud deafening sound.
I have tried several settings and this is the best possible closest quality that I am supposed to have in game when using voice.
If your front panel mic does not work at all, you can first try solving that problem by checking the option to Disable Front Panel.
HOWEVER, by doing this I can only enable mic functionality for simple programs such as Microsoft Sound Recorder. The bigger problem still occurs when I play games. This may be the same problem when people use certain applications!
My setup is a EVGA 680i mobo with Realtek HDA 1.71 (latest drivers as of July 2007) and my case is a Lian Li V1200B Plus II with a front panel mic and head phone jacks as well as USB and firewall. (usb and firewall work fine and are not related to this issue)
THIS SOLUTION SOLVES THE STATICKY PROBLEM WITH REALTEK HDA AND CERTAIN GAMES (AND MAY SOLVE THE PROBLEM FOR CERTAIN APPLICATIONS).
Firstly, ditch the front panel mic. PLUG IN YOUR MIC INTO THE BACK PANEL! If you have headphones like me, plug it into the back as well. The following settings will not solve the problem completely if you use the front panel mic jack! Why? Because the quality is still pretty bad and not the way I know it should be. If you manage to get it to work properly, please write a detailed post of how you did it cause i'd like to know. THANKS.
Next, go into your Realtek HD AUdio and make the appropriate settings as shown below. I've added some amateurish explanations just so everyone has some sort of shared understanding. If you can make it sound more nerdy and professional, please feel free to reply to my post. I'd be happy to learn. THANKS.
*Please note that these settings might not look like yours. For example, I know that some people have a Front Pink In and Rear Pink In, while I only have a Front Mic or Mic Volume (rear). However, you'll know if you have the right settings once you complete the next part. My explanations may not be correct either, but they sound right to me. So please forgive me if I'm wrong. =)*
**Also note, you want to mute the Realtek Hd Audio OUTPUT or else your mic will be ON as long as your computer is ON. When you use an application and you need to use the mic, YOUR COMPUTER WILL AUTOMATICALLY TURN ON THE MIC. That is why the Mic is MUTED in the OUTPUT and NOT MUTED in the Realtek HD Audio INPUT. Get it? Realtek was so smart so separate it like this.**
Now, once you make the appropriate settings they will be changed immediately. But you can click OK to close Realtek if you want.
Go into your Control Panel > Sounds and Audio Devices. Follow the pictures below.
Once you click TEST HARDWARE, follow the wizard to complete your computer's audio set up. It should detect stuff on its own or seem to do that. Speak into the mic and make sure your mic is picking up sound. When I speak normally, I can hit max easily (before I made all the adjustments above, my mic would only pick up 2-3 bars of sound and the quality was very Sh**ty.) Also make sure you can hear yourself properly in part 2. The quality won't be 100%, but it's the best you can do. Gotta love Realtek.
This solves my mic problem adequately enough that I can use my mic while I play games. This should also solve all mic problems for all the poor and unfortunately Realtek HDA users. However I haven't tested my mic on any other applications other than Microsoft Sound Recorder or in game (CS).
Now this better help someone cause it took a really friggin long time to figure it out, and then another really friggin long time to make this needed post for all the poor and unfortunate Realtek HDA users.
Best of Luck