In order to use xSquawkbox with Audio for VATSIM, simply upgrade to xSquawkBox 2.0 or greater. That's it!
Step 2: Connect to the network using xSquawkBox in the normal way.
The first time you run your simulator, be sure to open xSquawkBox's settings and calibrate your microphone.
Don't forget to assign a Push-to-talk!
You can find the xSquawkBox Guide here written by the developer.