I'd just try re-running the WMC setup from scratch first and hope it fixes it. I ran into a problem where I have to set windows sound up for 7.1, then disable the two back surrounds. If I picked 5.1 for both Windows and WMC (which I have a 5.1 setup), I would get an instant crash in WMC live TV.
I've also had Windows forget its sound settings as well after an update, so check there as well. It might be stuck in stereo or something and causing a problem.