Recently I too faced the same problem with my notebook after my daughter downloaded something from the net on it. Both WMP and WinAmp that I had, while able playing the songs alright, there was no sound caming out from speakers.
But when I rebooted, everything returned to normal. This had been going on like this for several days. I suspected some malwares cos I discovered that one of my mp3 songs which I chanced on playing on WinAmp had an announcement at the end of the song! There was none previously. It asked me to download some software, claiming that it's some kind of enhancement plugin for WinAmp and if/when I install it the announcement will automatically be removed. Instead of going thro the hassle of scanning with all the anti-what-have-you, I just edited the song and reformatted and reinstalled the Windows XP! To me, this is much more easier.
Now every thing works beautifully. addle_brains, as you have already wasted a few days trying to troubleshoot it, why not just try this route?