System->Preferences->Sound->Sound Capture is set to "HDA Intel ALC268 Analog(ALSA)" not "ALSA". This also worked on my Asus EEE 1000.
System- >Preferences- >Sound- >Sound Capture is set to "HDA Intel ALC268 Analog(ALSA)" not "ALSA". This also worked on my Asus EEE 1000.