My sound works 100% on my host. I have turned the volume all the way up on the guest, but there is still no audio. I've tried both youtube videos and local media in VLC. I've tried switching to ac97 with no luck.
EDIT: I followed the advice of HulaHoop and installed KDE instead of XFCE. The sound now works. Thanks!
EDIT again: I have found that sound also works in XFCE, but only if you install XFCE + Debian Desktop Environment in the installer. If you install initially without any GUI, and then manually install the xfce4 package afterwards, sound in KVM doesn't work for some reason, even after installing all the sound related packages.