Sound stops working whenever my friend uses his microphone.

[Slurpthegoghurt]

Hello!
After several tries, I am about to rip off the last piece of hair I have on my head.
To summarize shortly:
My friend decided to format his PC. So, he got the RealTek audio drivers, he got the drivers for his Logitech G430, and he got logitech gaming software installed. (we have also re-installed several times.)
Whenever he uses any program that would use his capture device (Teamspeak, Skype or Steam voice chat) all of his audio disappears, all of it. We have set "When windows detects communications activity"" to "Do nothing." Yet nothing seems to work.
When We start up skype, it says that there's a problem with the playback device, Note: His playback device is set as his standard unit and the skype settings all check out. (Picture for reference: [url]http://i.imgur.com/isLITDd.png[/url])
Can you Please help us out? Sound works fine otherwise!
Thank you in advance!