I'm almost positive that there should be sound effects. I always had trouble with sound (and video) in the PC FF7. It really wasn't a very well-designed game. Computers have come far enough now that playing the PSX FF7 in a PSX emulator on your computer is probably way way better than the real PC version of the game.

Check your sound configurations and whatnot I guess. I also have an SBLive! (Value) and sound worked perfectly fine for me. I remember Ifrit's guttural roar when you summon him because I used to turn the volume way up and scare the dog.