I got the audio working but it sounds like crap for some reason. Anyone know how to fix this?

To fix sound problems, check this out, and follow instruction
Link
Fix sound problems on server 2008

Tried this already doesnt work for me. Sound is still crappy.

Enable sound acceleration by going to, services and set "windows audio from manual to automatic"

creative?!?
x-fi, audigy...!?
4gig or more ram?!?

look 4 the new beta driver!!

Yeah but it doesn't help

If that's the case, the entirety of what's left to touch is within the driver. If the beta doesn't help, I'm not sure what else could be done other than re-writing the driver.

Now I have installed Vista SP1 (should have the same Kernel as Server 2008) and I don't have any problems...

It's the same kernel, but they are definitely not the same (tuning and features installed) out of the box.