What kernel ver are u using? Is it .16? If yea, try to switch to .15 and give it a shot. Ubuntu 7.10 is fairly new distros, it probably uses .16. I have an Acer Aspire 5050 laptop & have Fiesty installed in it (Ubuntu 7.04). When I got it ootb, it worked & I had .15 kernel. However, when I did an update to .16 kernel- the sound stopped working.
I reco trying out Ubuntu Fiesty Fawn 7.04 w/ the .15 kernel. Or try a distro which uses .15 kernel instead of .16.
But even then, you'll have to access the ALSA mixer & max out ALL the settings- including "front", "center" and "surround"