Mate, you may have to check the version from the site. Also Camfrog is notoriously unstable so it will crash out from time to time even when you get it working.
The best and the recommended way to play music in the room is "NOT via your mic" but via your "Stereo mix". I have tired to put up a small video that could help you enable your Stereo mix on your machine
Visit these links
For Win2K/XP : http://youtube.com/watch?v=tiW4lj5ZUNc
For Vista : http://in.youtube.com/watch?v=3QEtNEirc80