Any ideas why that might be and what I can do to fix this issue? I find voice activation to be discourteous so I'd prefer not having to use it just to play this game and chat with my friends.

Some in-game keybinds won't work after alt-tabbing until you press ALT key once again (while back in the game). Maybe that's the problem? Also check if your push-to-talk button isn't actually used by Wizardry for some kind of action.

Nope I have it bound to alt and then a secondary bind to del on the numpad, neither works.