Disable all Firewalls, including XP's built in effort if it's still running.
ps. The Norton firewall and Zone Alarm (ZA) do not generally work well together, however, if you are only using Norton's anti-virus program, it should not affect your ability to set-up a successful Web Cam. As a general rule, your anti-virus program should always run, except when installing new applications. Choose which Firwall you want to use (and Norton or ZA are better than XP's) and stick with that for normal use, but not while using a Web Cam.
try double clicking the speaker icon in task bar so volume controls come up. Click on the advance tab. See if mic2 select or 2mic boost is selected. Try swapping tick over to see which one it will work on. Had to do this with my webcam and mic to use msn6.1.