The paging file in my Virtual Memory (VM) settings could not be set in any way that I tried (Go to My Computer/System Properties/Advanced System Settings/Performance Settings/Advanced [Processor Scheduling]).  Every time I restarted after setting the VM, the same box came up at the beginning of logging into Windows 7, saying I need to set the paging file again.

I phoned Acer and got the advice of re-installing Windows 7.  Luckily I read a few responses on the Internet saying that that didn't work, so I looked a bit further.  I was in no mood to re-install and in the process losing a few hours, with nothing to gain.

After a bit of searching I got the help I needed.  It turns out that there is an Audio File System (afs) malfunction that prevents the VM to be set.  Deactivating that solved the problem, with no ill effects (so far!) on my audio output.

To deactivate afs:

Go to Start, type cmd in the Search box, right click on the cmd.exe file that appears under Programs, choose run as administrator, click Yes in the UAC window that pops up, and type the following command in the Command Box:

sc config afs start= disabled (important: there is no space after start and one space between the = and disabled)

The best news of all, is that it solves my problem with Hibernating and Sleeping.  I love the response time of the Sleeping mode, and was also frustrated that the laptop freezed whenever I used it.  With the paging file problem solved, the computer can be safely put to sleep, because the VM is sorted out.