I have my mic set for mute in the Windows sound panel thing, and in Teamspeak it will work whether it's set to push to talk or set on voice activation (only works when TS is running though, so during normal Windows use it's muted)
Check settings -> options -> other and that disable direct input isn't checked..
Have you tried local test mode, and maybe increasing the mic volume in Windows? Also check that microphone boost is on.