Help with microphone recording on laptop

Hi,

I'd like to use my laptop just for recording ideas, basic demos, etc but I'd like to have fairly good quality. It seems that in order to get my microphone to work properly I have to go for the lowest quality level in Recording Devices > Microphone Properties > Advanced default format > 2 Channel, 16 bit 8000Hz (telephone quality). Which is quite annoying although the sound isn't too bad for what I'm doing. Is it just that my sound card (SoundMAX Integrated Digital HD audio) is a piece of **** or is it more likely to do with my microphone?

I find at higher levels that there is a lot of hissing and at the very highest levels (DVD quality) there is no sound at all (this was the default setting so I thought the microphone wasn't working).

Weirdly my headset microphone work fine on any quality and even records at any level although obviously this isn't what I want to use. Seems strange as both the headset and microphone are plugged into the same 'line in' jack so I don't see why the computer would interpret them differently.

So its just the vocal microphones that don't seem to work correctly. Its a Dynamic DM-20 Microphone. It works fine plugged into an amplifier.

Thanks.