Just thought I'd let you know - I finally fixed it. Long story short, when I installed Win7 I didn't re-install all drivers. Didn't need to 'cos Win7 comes with a very comprehensive set built in, so the "genuine" Realtek driver wasn't there. The default sound device was using MS own drivers. Odd thing is that everything - absolutely everything - else works exactly as expected. I installed the Realtek drivers this morning and now MP works as well.
Thanks for trying.
Thanks for letting me know, set my system as similar as I could and could not find a problem so was little perplexed, I did wonder about the realtek driver, why I asked about the version - you seem to always have to install the one from the site.
Glad it is working