Well, I did a quick search on google and found that numerous people have this problem. I'll give you a couple of suggestions but none of them are guaranteed to work-
1: You said that you tried setting your compatibility to Windows 95, try setting it to 98, i believe it also runs on that.
2: Overwrite wavmix32.dll and wavemix.ini with the versions in the Zip file. Also set the Disable Visual Themes compatibility option on your Yoda Stories shortcut as this stops the game from crashing after trying to exit the game.
I'm pretty sure option 2 should do it, but you may want to try option 1 first, it is simpler.
I hope that worked for you.