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VMWare recommended that I follow a procedure from Nuance / DNS that turns off the sound card, which in Fusion is a Creative Sound Blaster, emulated, I suppose. The Nuance document referred by VMWare was their technical note 4507. This immediately fixed the problem. That same tech note lists a couple of other possible solutions.
Using a USB mike, so far my experience is that DNS 9 under XP running in Fusion is faster and more accurate than the DNS 6 I tried about 5 years ago on a fairly fast (for the time) windows PC. I have not tried to dictate into anything other than the built-in DNS "Dragon Pad" word processor program. I did try to see if it would work in MS Word on the Mac, but that was, as I expected a no-go.
Here is the text of Technote 4507:
Sound card conflict
When using a USB microphone with an internal sound card, there may be a conflict between the two devices. As a troubleshooting step, the internal sound card may be disabled to prevent such a conflict.
Steps to disable internal sound card:
Click on Start > Control Panel.
Double click System.
Choose the hardware tab.
Click the Device Manager button.
Expand the section entitled "Sound, video and game controllers" by clicking the + sign.
Double-click the sound card and under the Properties dialog box that appears, disable the device.
20-decibel boost
Computers that use sound chips instead of sound cards often provide a 20-decibel boost to the sound system to give a better quality to the sound output. This 20-decibel boost may cause background noise that affects the audio set up as well as the quality of dictation. This feature should be shut off in any unit that uses a chip instead of a sound card.
Please follow the steps below to disable the 20-decibel boost:
Right click on the speaker icon in the system tray on the bottom right of the screen.
Click on "Open volume controls."
If microphone is not shown, click on Options > Properties. Check the box next to microphone and click Ok. In some cases, the microphone option is not listed or the advanced options are grayed out. When this happens, adjust the volume for the recording instead of playback and check the box next to microphone.
If there is a microphone option, click on Options > Advanced controls. This will put an advanced box in the microphone control. Click on the advanced button. On the bottom of the window there should be a box marked either "20 DB boost", "microphone boost", or something similar. If this box is checked, uncheck it.
Once again click on Options > Properties > Recording radio button and be sure that microphone is also checked.
Click OK.
Click Options > Advanced controls to put the advanced box in the microphone control.
Click the Advanced box to confirm that the microphone boost or 20 DB boost box is unchecked.
S/PDIF control
In some cases, computers that have S/PDIF enabled may not be able to complete the audio setup wizard. This option may be available with multiple sound cards, such as the Avance AC97 audio sound card. S/PDIF (Sony/Philips Digital Interface) is a standard audio transfer file format. It is usually found on digital audio equipment such as a DAT machine or audio processing device. It allows the transfer of audio from one file to another without the conversion to and from an analog format, which could degrade the signal quality.
Steps to mute S/PDIF:
Right click on the speaker icon in the system tray on the bottom right of the screen.
Click on "Open volume controls."
Check the "mute" box under the SPDIF control.
If there is no S/PDIF control, click on Options > Properties. Make sure the S/PDIF box is checked under "show the following volume controls."
