Solution for Windows Host sound card device driver issue resulting in "A device ID has been used that is out of range for your system . . ." on Ubuntu and "Error in creating sound stream . . ." on Windows with VMware Workstation. This article explains the resolution for getting rid of the sound card related issue experienced in Windows VM as well as Ubuntu VM with Windows as host when running VMware workstation. This is a host issue and not VMware one.

VMware Workstation 11.x (for Windows)
VMware Workstation 10.x (Windows)
VMware Workstation Pro 12.x (Windows)

Enabling "Stereo Mix" on Windows host fixes the problem. The stereo mix option is seen under "Recording" tab of sound settings. If it's not seen, install the specific sound card driver for the underlying physical sound card based on its manufacturer. Once the stereo mix option is available, it needs to be enabled for the scenarios where we specify the host sound card for the VM in its sound card settings explicitly. If the default host sound card is used, there will be no sound issues and hence
no need of enabling the stereo mix.

It's important to select "Listen to this device" for "stereo mix" under the "Listen" tab of its properties. The same applies to the microphone as well. These are part of the sound settings.

Select the playback device for the microphone to be based on the installed physical sound card driver. For example, if the driver is from Realtek, then it would be "Speakers (Realtek High Definition Audio)." And for the stereo mix, this would be "Default Playback Device." This set up is necessary to get the recording to work with stereo mix enabled.

After all of the above steps, while specifying the host sound card in the VM settings, speakers either based on the real headset connected or the physical sound card driver can be selected. The resolution proposed above works for
both.

Note: It's necessary to check that the guest sound card drivers are installed and set up properly. For this, selecting the default host sound card in the VM setting is recommend to check that the necessary sound drivers are installed for the guest so that both playback and recording works.