Joe,
Sorry if this sounds like a daft / obvious idea, but within the Volume Control ( Start / All Programs / Accessories / Entertainment / Volume Control ) did you ensure that the "Mute" check box was not checked as well as increasing the volume slider for the microphone ?
Also, depending on your set up & sound card, make sure you don't have another Volume Control panel ( or other control settings ) specific to your sound card, that could also have a "mute" switched on.
Failing these try the obvious and use the headset and mike on another computer to make sure it actually works, and / or try a different headset on your laptop.
If you still have no joy, and "it" is only 2 months old ( is that the laptop, "XP" or the headset ?? ) then try the manufacturer under warranty.
