No Audio after importing m2ts files

[dac1a]

Hello.
I just upgraded from 12.0 to X3 and have applied the three patches (SP1,SS and MLE) that are available on the website. The 12.0 version has not yet been deleted. It does have SP2 patch installed. The issue resides in both versions.

After I have imported a .m2ts file ( I have tried in both versions) there is no audio; only the video. The file plays fine in other players (VLC, MPC etc.) The audio is not muted nor are the volume levels too low. Since the file plays fine on other players it would appear I have the necessary codecs installed on my PC. Am I missing an X3 codec?

Secondly, Smart Proxy is enabled but preview playback is choppy and X3 freezes and crashes often.

Any help on these issues would be appreciated!

Vista Home Prem.
Core 2 Duo T7200 2.0
4GB Ram
GeForce 7900 video card
2.5TB HDD space available.