I've gotten about halfway there. The important thing is to realize that the sound system has two microphone inputs, the microphone itself, and the microphone input plug. They are separate channels of input, so you need to enable the one you want in the mixer.
That said, I've gotten the microphone to work - since I can get it to pick up sound from the microphone, and output it to the speaker. But I still haven't gotten
Skype to select the microphone as its audio input source.
For sure, audio setup in Ubuntu needs some work.
Update: I just spent some more time on this... and tried the tips on setting up Pulse Audio found in another thread here, still can't get it to work.