I tested the audacity thing, and it sorta works. I can boost my speech and clean some of the background hisses, but I still think that's a temporary fix.

Recording levels are all maxed and all that.

There is a slider in the cord of the headset, which determines the volume of the said headset independently from the system volume (like in a tabletop speakers). I tried to see if that also constitutes into the mic volume, but it does not.

My friend tells me that Skype worked fine, and even recorded some of the dialogue. I listened that clip and my voice was very clear and loud enough. The recording was made with the same program (playclaw).

I honestly have no clue anymore, I don't know what is blocking what, or is Skype enhancing my mic when I make calls?

Do I need a new mic? If so, can you suggest something that will definitely work?

I did a quick look and Skype does change volumes behind-the-scenes to make it louder. But you've checked everywhere that I can think of...

If the mic works with Skype, I don't believe you need a new mic. It's probably some setting that we're all overlooking.

http://www.youtube.com/watch?v=Scx0-2DsTEI

This is a quick recording my cousin did while we played SR3. My voice can be heard via skype in the recording, even though its night and I am almost whispering.

The game footage, where I am at the other end of the mic, starts a bit over 2 mins into the video

Do you have Skype running all the time (even when not in a conversation)? I've read that it does control the volume automatically.

Nope.

All this work and I'm sure it's just something simple that is being overlooked.

But I am out of ideas at the moment.

Use the Windows Volume Control (the little speaker icon) if you have Windows and use Wave Out for Input.
Then adjust the volume of your mic.
Be careful not to make it overload if the output level is too high.

Wave output?

You use the Wave Output (the sounds that come out of your computer) as a recording input. You have to be careful with mic feedback though.

Can you... go step by step? I am both extremely slow today, and just woke up from my nap..

I think to do what mrmarioanonym mentions, get to this screen and unmute the microphone.

Steps to get to that screen were mentioned in this post.

Side note: Depending on the software, you might be able to use both the Wave Output and Microphone input as recording inputs.

It's already unmuted... even the front mic (which I don't have) is unmuted and maxed out O.O

I hand the stage back over to mrmarioanonym. :)
Actually, would you post screenshots of your speaker playback properties and your microphone input properties?

(Doesn't matter that they're in Finnish)

Here they are

Noticed that I cannot record from my mic using audacity while Skype is on. It gives an error...