Sounds like your mixers aren't setup correctly.
In your Recording Mixer select "What U Hear" / "System Mixer" / "Stereo Mixer" (Name varies so it maybe one or none of those.)
In your Playback Mixer make sure the microphone in NOT muted.
The way this feature works is that the DSP uses whatever your Recording Mixer is set to. If it is set to just the mic (which it sounds like now you will only get the mic). The proper setting will broadcast any sound (email notification, AIM, etc.) your computer is playing, that is why you will need to un-mute the mic in the Payback Mixer.