OK, so today I have more information.
I'm actually getting two error boxes when I start up windows. One says:"Generic Host Process for Win32 Services has encountered a problem and needs to close..."
The other one says: svchost.exe. - Application Error. The instruction at 0xsomething referenced memory at 0x0. The memory could not be read.
I have an Intel D915GAG motherboard running BIOS EV91510A.86A.0478.
I'm using onboard sound: Intel Realtak HD Audio Controller. Audio codec ALC860... not sure how to find more info on this?
I have sndvol32.exe in my system32 folder. If I try to run it I get the same error as when I click on the volume control on the task bar.
One thing I think is weird: I have a Realtek HD Audio Manager installed as well, which has a little 3D audio demo... if I try to play the demo it works fine! nothing else works though. mp3s, system sounds ect.
I'm going to try a bios update as well as an audio driver update.
Thanks for any help