Oh crap. I installed Vista on a new machine, did all the updates, bought a new sound card (because I thought that was the problem). Little did I know to look here.
I finally did trace the problem to Beyond TV. It doesn't seem to cause a problem if BTV is not running.
A fix please?
I can confirm the error on a Soundblaster Audigy and an onboard Soundmax AC97.
The audio will come back upon restart of the any program where the audio stops, but this problem is "Beyond Annoying"
On top of recording and live TV playback, it also seems to affect other players like flash and WMP that are running while BTV is running.