If you go to Control Panel, System, Device Manager, you'll likely see the device listed in there. It either has a broken driver, or wrong driver. I would recommend you find a device that's not working properly or has missing driver (it would have a yellow mark in front of the name) and delete it. Then click at the top to refresh the list/search for new hardware, for it to install new driver. You may also try to open the properties of that incorrectly installed device and click on Reinstall, then point to driver that came with the headset. But given this is Microsoft product, it be capable of downloading the driver from Windows Update. The point is that's already installed but either with incorrect driver or no driver. That usually happens when you plug it in before installing driver. So you need to remove driver and reinstall it.
Another thing you can try if after installing doesn't work is use a different USB port. But that will use the same driver already installed for that device, so just doing this alone won't help in your case.
Hope it works for you.
SOURCE: Headset isn't recognized by computer and audio doesn't go through headset
With the infamous Vista, try:
Start --> Control panel --> Hardware and sound --> Sound --> Audio devices admin [I have a Spanish OS, I hope it is the same in the English version], then assign as default device the headset.
With Skype and other sw, you have to specifically pick the lx-3000 as the device that will be used as audio device (and the same has to be done to use the mic).
Pretty cumbersome....
SOURCE: Have Windows XP and Lifechat
Hey! If you try to install this does it work properly?
http://download.microsoft.com/download/F/7/0/F70FBF72-2AAB-4D60-9E49-7B015E8E5851/LifeChat1_4.exe
Otherwise did it come with an installation cd?
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