Hi, first thing, FC4 is damn old. Upgrading to FC8 is not only much more secure, but it also likely has much more up to date drivers, so that alone might solve your issue. If your hardware is a little older and can't really handle a modern gnome or kde, you can always install Fedora8 with a lower resource window manager like icewm or fluxbox.
If you won't upgrade, (and you really really should), then the best bet might be to download and install the latest alsa drivers from http://www.alsa-project.org/main/index.php/Main_Page
You'll need the alsa-driver, alsa-lib and alsa-util. They are the first 3 listed under current versions. If you need help installing them just reply back here and we'll see what we can do. There are a number of very good howto's on the net though, so you should be able to handle it. Orrrrr....well....you could just let the FC8 install do it for you, be more secure, and have loads more uptodate applications too......
That would be the smart and easy way to do it. FC4 likely uses oss to handle the sound. With oss only one sound program can use your sound hardware at a time. This is very limiting, and could be your problem, as it sounds like you have the mixer and mic set up correctly. Modern versions of Linux use alsa to handle sound, and alsa can certainly walk and chew gum at the same time. (oss can't.)
Good luck setting that up....or .... you could let FC8 set it up for you.....or Kubuntu...my distro of choice...the (K)(x)buntu's are very user friendly, and have a reputation of being very friendly towards new users. You won't run across the famous linux taunt of "RTFM" on ubuntu forums, as it's banned.
Good luck with that...and let us know how it works out....