I ended up pulling out the USB for the headset while in game and now I have no sounds whatsoever, regardless of what I tinker with. This is after restarting the game, restarting the computer. Sound still works fine on computer and AH2 but I seem to have broken it for AH3!
Try this, go into C:\Hitech Creations\Aces High III\settings and find the sounds.cfg file.
Rename it as sounds p1.cfg so you can save it for later.
Then go into C:\Hitech Creations\Aces High\settings and find sounds.cfg, that's your AH2 sound settings.
Use Ctrl drag to copy the file to your AH3 settings folder.
It this works for you as it did for me, please attach your ah3 sounds p1.cfg and your ah2 sounds.cfg files here using the Attachments options below the reply edit window so Hitech can compare the two.
Good luck.