I've got a Fatal1ty headset and an audigy 7.1 SE, and they work fine. I notice that in my recording device window (in windows 7) it says "default device" instead of "working".
I'll assume you've made sure it's the right input jack and that the mic is turned on through the headset voluem control. (My older audigy 2 zs wasn't colour coded and was a giant pita to get the right inputs)
I don't recall doing anything to get it to work except unmuting it. How are you testing it? Skype, games, checking the "listen to this device" option in properties?
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