Loud audio chopping sound in Xbox app for W10 party

Thanks for the reply. As I said, the sound isn't only heard on my end. So, testing with other headphones isn't going to change what others hear when I'm in an Xbox party. However, I do know that this problem occurs whether I'm using headphones or speakers.
After checking the drivers, Windows 10 says that the Realtek HD Audio drivers are updated. I updated them again anyway.

The steps you list aren't accurate to Windows 10, and they are for audio playback rather than recording, so being unable to follow them, I did not.

Is there a dummy or support account over at Xbox to which I could try connecting to test this? The problem only occurs when I connect to another person, but the problem is also causing me to lose friends so I don't have a way to test this without just causing
someone to suffer.

Did you check listening with other headphones?

The issue cab be resolved by making Microphone as the default device and updating the sound card drivers.

Make sure that the microphone that you are using is not disabled and is set as default in the computer. Follow these steps to check this:

• Right click on the volume icon and select “Recording devices”.
  
• Now, right click on an empty space and select, “Show disconnected devices” and “Show disabled devices”.
  
• Select “Microphone” and click on “Properties” and make sure that the microphone is enabled.
  
• You may also check if the microphone that you are using is set as default.
  

Also suggest you to run “Playing audio” troubleshooter to diagnose and fix the issue.

• Type “Troubleshooter” in the Search box and hit enter.
  
• Select “Hardware and Sound” from the Troubleshooter Window.
  
• Select “Playing Audio” under Sound option.
  
• Follow the On Screen instructions.
  

If you have loud sounds near you when gaming. Other people in your party will be able to hear it. Especially so if the headset has a sensitive mic. You can turn down external noises in the audio settings. But it won't work with super loud noises. You may
just have to mute often.

The sounds sound weird. It sounds like the audio is too loud for the speakers and the speakers sound like they're about to burst

Did you try reducing the other noise by 50 or 80 percent in your audio setting for your headphones. It makes my voice and surrounding sounds alot lower but the party chat and game is still loud. Good luck hopefully this helps you out.