It seems the SigmaTel High Definition Audio Codec seems to get confused with all of the enhancements turned on so if anyone else is having playback problems similar to mine is reading this and you have the same Codec (to find out mouse over the speaker icon situated in the right side of system tray) try the following:

Click: Start > Control Panel > Sound (it might help to have it on classic view to see the sound icon better) > Speakers/Headphones > Enhancements.

Check the box that says 'Disable all enhancements" and try playing back again to see if that fixes it.

Worked perfect for me without any noticeable loss in sound quality.

Thanks for the help and input WonderingWhy

I was having this problem, but I have Realtek. It will work if you follow the same general instructions, but you need to disable all sound effects. It worked for me.