If you turn the system microphone off in the Recording Devices tab of your Windows Sound Settings, does that help?
Does this happen only when FxSound is On, or also when it is turned Off (via the main Power button)?
The Ambience slider specifically and intentionally adds echo (“reverb”) to your audio stream, so could you please try turning the Ambience down and let me know if this improves anything?
This is a quick link to the most recent version of my “first-aid-kit” list of settings to check if you want to verify that your FxSound is set up properly and perform some basic troubleshooting.