I think the point of confusion here is that, in DOSBox terms, frame rate (number of times per second the screen is updated) is not the same thing as "performance", which affects control response time, smoothness of sound, etc. You can increase frame skip, slightly, to make the screen update less frequently, and actually gain some responsiveness. Does that make sense?
Like I said earlier, the "recommendations" of the install program are just guesses based on what it thinks your machine's clock speed is. What they REALLY control are just detail levels, slow turns off stuff like engine glow and uses lower detail models for the spaceships. So if you want to play with the best graphic settings, just tell it FAST and tweak DOSBox until it runs smoothly.
As for the digitized sounds not working, I have no idea what's going wrong there. I can't reproduce that problem with my version of X-Wing. Make sure your DOSBox and X-Wing settings are the exact same in either test case. Make sure Sound Blaster emulation is enabled in your dosbox config file, if you're using one. Make sure it's using the default settings too, address 220, irq 7, dma 1, as X-Wing doesn't allow you to set those manually and it might not be able to detect different settings.