[J7N]

I previously wrote to OpenCloud this:

The volume control in Windows 98 is handled by the audio driver and audio hardware. Those determine how fine you can tune the volume. Usually by dragging the volume slider in applications like BSPlayer or Media Player, you are altering volume of a single DirectSound channel, then comes the WaveOut bus volume control, then the Master volume. If your audio hardware has no DirectSound support, you control the WaveOut and alter volume of all digital audio streams currently playing.

To (attempt to) change the output device go to:
Preferences -> Audio -> Output device


I think it's the same under WinXP except that everything is being mixed in software.