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When newsounds is off, the TTD sounds do not play either.

With the attached config, no sounds play (music, yes, but not sounds). Setting either newsounds 0 or newsounds 1 causes the sounds to come back.

It happened for me too...
I had stopped the music and I found that the sounds are playing but I hadn't heard them with the loud music.
The only sounds which disabled by this switch are the "Clicking on a tool" sounds.
[Edit:]I don't know why it's a problem, because everything in the game is fine.