This has been a problem since pulseaudio was introduced. I did a fresh install 
of 10.04 Lucid and the same bug is still there. 
Personally I solve it by removing pulseaudio but I tried the suggestion in #30 
first and it worked for output.

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Pulseaudio fails to initialize ICE17xx chipsets
https://bugs.launchpad.net/bugs/178442
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