I never had very good ambient or speech sounds in 1.4 or CE, so I installed a new Sound Blaster Audigy SE card and a 5.1 speaker system. That didn't resolve ambient sounds (forest critters, chests opening, spoken sound while facing the npc, etc.)
Once again, out of curiosity, went to the help forum. The main suggestion was to run dxdiag and in the sound tab, set hardware acceleration all way to the left. In game, the sounds are ok. Kept setting hardware sound acceleration back right one notch at a time till I found that one notch left of full is ok, and full acceleration was the problem
So now guess I'll play through again just to enjoy full sound capability