As soon as I activate an NPC for a dialog the sound stops and all I'm left with is subtitles. I've tried reinstalling the whole game but that doesn't work. This happened before I added any mods. It really takes away from full game enjoyment. When the dialog stops I can hear them again.

This occasionally happens to me on the 360 version, it is usually fixed by re-loading a save or restarting the game. I haven't come across this on the PC version but I thought i'd let you know that you're not the only one experiencing this bug.

Check your sound settings in sound manager --- If you have the sound system set to 5:1 or 7:1 the NPC conversations are sent to the Center channel speaker and if you do not have a center channel speaker you do not hear the conversation ! So make sure your sound manager is set to the correct setting for the speaker setup you actually have.