Comment 1 for bug 65634

Is important to note than internal microphone works with skype.

Choose 'ATI IXP (alsa mixer)' as a sound preference

And set 'Open volume control' to next options ...

Edit>Preferences>Activate :
(Master-PCM-Line in-Line in capture-CD-Microphone-Microphone capture-Mic select-Capture)

Then at 'Playback' tab set Microphone and line-in to unmute and at higer value
Then at 'Capture' tab set all to unmute and higer value
Then at 'Switches' tab activate Line-in and Microphone
Then at 'Options' set 'Mic select' to Mic1