Link the Mute and volume slider functions in the sound menu

Also, clicking mute a second time (before touching the slider again) should return volume to the previous level, preferably with a smooth but quick transition.

dragging the volume slider when the sound is muted should not un-mute the sound. if the volume was muted because it was too loud (say, set to 100) and dragging the slider to a lower level un-mutes the sound, the user then has to deal with the too-loud volume until an acceptable level is reached. while I may only have to deal with it for a split second as I move the slider (which is still annoying and possibly annoying for people around me), my great-grandmother may take a little while to get the volume to where she wants it. plus, if the user is using some sort of remote device where holding a button down to continuously decrease the volume is not possible (and individual button presses are needed to decrease the volume a set number each press), then un-muting the volume after the first decrease might leave the user in a situation where they're forced to output a very high volume audio until the desired volume is reached.

I agree fully with michael perigard. I would like the possibility to change volume level when sound is muted.

@michael, personally I think that what you are describing is a much more remote case and shouldn't compromise the experience for most of the cases.