There are a lot of things in your cap, that may interfere. There are two Mouse/Keyboard objects, the mixing of autoplay/channel play, triggering sprite clicks without testing against visibility, etc. To get rid of them and so to see, if the basic functionality is working, I've set up a cap that only mimics your design (main menu, level layout, extra sheet controlling the mute menu) and placed the mute menu to a seperate layer using inheritance.
This one works perfectly on my pc, so try this one by just replacing the path string to your path and see if it works. Then you could try to implement it.MuteChannel.cap