I noticed after the 10.3.8 update that all of my Non-Apple apps (i.e. Entourage, Excel, PSI (Jabber Client), Flash) lost sound. I got the startup chime, I could use the Volume Keys, but no sound. Finally I got on webchat with Apple and they had me shut down all non-working applications, then open GarageBand, play something, then open the apps again.
I now had sound. I rebooted later in the day and the same thing happened. So I followed the steps again, and once again, I had sound. I just wanted to post this to let others know the solution.
Mac OS X Hints
http://hints.macworld.com/article.php?story=20050215095812331