Define "Muffled"?
If you are talking about the recording volume level being simply "too quiet", there is a quick fix.
Go into the volume control applet (I'm on Win2k so I don't know exactly what XP looks like, but anyway, get it by double-clicking on the little speaker doohickey in the task bar) and go Options, Properties, Adjust Volume for: Recording, OK. Now it should show a level thingy for the microphone. Increase that, and also play with its "advanced" option of the +20db mic boost.
If you are talking about the timbre of the recorded audio as opposed to its volume level, then you're back to the mic.