I have been able to get audio playback working but not recording by installing 
the latest ALSA drivers using this script:
http://ubuntuforums.org/showthread.php?p=6589810

And adding at the end of /etc/modules the line:
snd-hda-intel

And rebooting.

$ lspci | grep Audio
00:14.2 Audio device: ATI Technologies Inc SBx00 Azalia (Intel HDA)

-- 
pulseaudio 0.9.11 ppa Luke real-time/high-priority scheduling not working
https://bugs.launchpad.net/bugs/265010
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