Hi!
There are actually 2 versions of Monkey Island 1. The first version came on 5-1/4" diskettes and a copy protection code wheel. The revised version came on CD (in the Bounty and Monkey Island Madness packs). They are not the same.
The CD version changed the command interface (bottom of each screen) to be the same as Monkey Island 2, in both look and control. It removed the code wheel question screens. Finally, the music and sound was completely redone. Unfortunately, they apparently removed all of the original digital sound effects. (For instance, doors closing and parrot squawks in the town at the game start, teeter-totter rock that sinks the ship, etc, etc.). It's easy to tell which sound version you have. Just go to the dock at game start and listen. If you hear seagulls and waves, you've got the new version (and likewise your digital audio is working).
The new version should usually run fine without VDMSound as invoked by WindowsXP. (If not just add the command line parameters others mentioned above). It may not seem like it (cuz the fx are missing), but if you listen carefully, you should hear both MIDI and fx in random places
I have tried everything to see if somewhere the original sound effects can be enabled, but it definitely seems they have been removed. I believe this because both MIDI and digital sound work in the revised version (if you listen carefully), it's just that all the really neat individual sound fx have been removed.
Hope this helps...
eediot