Below is an explanation of each type of volume control. You will need to use Internal Volume with MC16 being the active program when changing volume. With some soundcards/DAC's, you need to turn the System Volume all the way up and then switch to Internal Volume. If using a keyboard, you may have trouble controlling the volume if the mfg. keyboard drivers (Microsoft Intellitype, Logitech Keyboard drivers, etc.) are loaded. What keyboard are you using?
Application Volume - This is a Windows 7 feature that allows each application to be set to a different volume level. You might want MC playing in the background and still be able to hear system sounds while working in a program. You could set MC to one level and system sounds down low. It allows you to increase the volume in MC without increase the volume for the system sounds. You need to be using Direct Sound output to use the benefits of this volume method.
Internal Volume - This is done at 64 bits and bypasses the Windows volume control. When using ASIO, WASAPI, or Kernel Streaming output to some devices you need to use internal volume because the Windows volume control is bypassed completely. The MC program needs to be the active window for the volume to be changed.
System Volume - The Windows volume control is done at 32 bits and can be controlled at any time unless the device bypasses the System Volume Control. Using this allows you to easily change MC's volume regardless of when the application is the active window.
Disabled Volume - This makes sure you are sending through a completely unchanged signal to a DAC or receiver and are using the outboard device for volume control. MC's internal volume control could result in better quality, but using the outboard device for volume control could be more convenient.