Essentially, the above is correct.
The Subwoofer is being sent a regular speaker signal instead of a Low Frequency Effects signal, and because it's double the size of - and closer to you than - the L/R speakers, it makes it sound as if it is the only source of audio.
Disabling the subwoofer or using generic windows audio drivers solves the issue of balance, but we need to wait for new drivers before we can have a proper 2.1 speaker setup.