Is the correct device selected in the "Options->Preferences->Game Sounds" of the game? Do you have more than one type of recording device? Be sure to set the microphone as the primary recording device in Windows.
The game is seeing a microphone (that is the beep), but it may be attached to the wrong device, or the game is locked out from using the device due to another application locking us out.
Also, make sure the 'V' channel is set to '101'. While testing, you may want to set the 'V' channel to your game ID. Once you can hear your own voice coming back at you, then it is working just fine.