This exact same problem is happening with my i845. At first I thought the surround mode was on, so I installed ALSA and tried turning it off but it didn't help. The sound is extremely faint, and because the PCM is jacked all the way up on the mixer, the quality sucks.

This isn't just in knoppix, my rh9 box does it too...

before anyone even tries: *yes the mixer is up *all the *way***. Everything is completely maxxed out on the mixer and there are no other knobs i can turn up. That's on all the OSS mixers and alsamixer.