this is the first page that pops up on google for "earthworm jim special edition no sound" inquiry.
I have found yet another BUT SIMPLE solution for this old problem:
1. Launch game in win95 compatibility mode. It will allow you to enable sound.
2. Replace wail32.dll in game directory for example for THIS. It will fix instant game freeze problem when sound is enabled.
It works on my workstation win7 home edition 64bit. If it helped, please post this solution somewhere else so everyone will have this issue solved.