When you do a repair install, you don't lose anything. You don't lose your
documents, files or anything you saved, including installed programs. It just
repairs errors on your computer and registry entries. From what you're telling
me, it might possibly be a corruption in at least some registry entries. I had
the exact same problems you did. I also contacted Macromedia and tried their
suggestions which did not work. I also uninstalled and reinstalled macromedia
completely and I also could not hear anything from flash but was able to hear
sounds and music everything else except macromedia and system sounds. But you
do hear system sounds (like when you log on and log off, error messages pop up)
which is different from me but other than that, I had the exact same problem.
Try doing a repair install. You will not lose anything so you won't need to
do a system restore. Here's the link how to do one:
http://www.windowsreinstall.com/winxphome/installxpcdrepair/part1.htm