Thats a decently old laptop, depending on how much Microsoft or whoever charge to fix it, you might be best off just buying a new laptop (it would be fairly easy to move over all your files).
So the laptop cant play through the plug-in speakers. I assume the laptops speakers have also stopped working?
My gut feeling says that the sound chip inside the laptop has died since it cant recognize any audio devices, and to fix that would be a motherboard replacement, which would be expensive.
You could get around it however by using an external sound card. It would be a fairly small thing, plugs in by USB and has audio jacks on it to plug your speakers and microphone into. Set it up in Windows so that all the sound processing happens on...