As far as the switches go, they should both be down for INTERNAL clock.
If that checks out, try connecting to another USB port.
If that doesn't work, try connecting the keyboard to another computer.
If that doesn't work, try a different USB Cable.
Try clicking on the keys in Analog Lab with your mouse to see if you have a sound. If so, there's a bad connection between the Keystep and the computer.
If there's no sound by clicking on the keys with the mouse, then there's a mis-configuration with the sound out setting.
If after all that, it still doesn't work, get in contact with Arturia support.