I found a solution for Win 7. First of all I decided to roll back the Widi from 126.96.36.199 to version 188.8.131.52 from Lenovo's website, it was at least giving me a few seconds of audio before the error message and disconnect. Then I disabled prompts for firmware updates and software upgrades. I was still getting only a few seconds of sound BUT no disconnection or error message, the sound just stopped. Started fooling around with my audio (Realtek HD audio manager in my case) still only getting a few seconds of sound after selecting it as the default playback device. Then went to the Window 7 control panel, here's the solution:
Control panel >Hardware and sound>Manage audio devices>Speakers/IWD>Properties
Click on the advanced tab and uncheck "Allow applications to take exclusive control of this device".
That's it! Very simple, it only took me a few hours! I'm surprised Intel hasn't found this. I'm happy now!!!!
I'm not sure if it allows both at the same time, I can't test the Widi audio because I'm using a projector without speakers. Doesn't really matter though because you can switch between the two.
Great idea, unfortunately didn't work for me. Sound still not coming from laptop. Did you undo any other settings? Was not thinkng that I had to do the stuff you had in the opening paragraph, in particular didn't roll back the drivers, because that makes my HD monitor blurry, so you think that is critical to your solution working. either way, ,I never have had any noise come from my Dell XPS at all.
I had it running correctly for about 2 hours, disconnected and it reverted back to the original problem. What I had to do was constantly click the set as default button for the internal speakers in manage audio devices until it stuck. Tried it several times and it always worked. Sorry you can't roll back the drivers, like I said I wasn't getting any sound at all when I updated the driver, I never tried my soulution after updating.