Any way to improve compatibility with older drivers?

Hello.

I have formatted an old Vista laptop yesterday and although everything seemed to work just fine (Installed w10 x64 due to ram being 4GB) the sound didn't work at all even if Windows Update installed its correct driver and everything looked fine.

The sound card is Conexant HD Smart Audio 221. There is no way of making this to work under x64 it seems.
Reinstalled x86 and it worked out of the box, even with a generic HD Audio driver.

I am wondering why Windows Update is installing a driver that DOESN'T WORK. Don't MS test drivers they provide through WU?

As is often the case, things are rather more complicated than they might appear.

You must understand that Microsoft distributes device drivers via Windows Update but they did not write them. They were written by the device manufacturer and supplied to Microsoft. Writing device drivers requires a large amount of detailed technical information which manufacturers consider a trade secret and would not choose to reveal to anyone. The driver in question would have been tested, but obviously not on your computer. It would have been tested on the computer the driver was designed for, not an older model which the manufacturer probably makes no claims as being compatible with Windows 10. Windows Update chose this driver because it was the closest available. Often such drivers will work but sometimes not.

When upgrading any OEM computer, particularly a laptop, always check with the manufacturer if it is supported for the OS in question. If not you proceed at your own risk. And don't blame Microsoft if it doesn't work.

I have a somewhat newer computer, built in 2009, that the manufacturer does not recommend for use with Windows 10 as it has not been tested with it and no updated drivers have been written. I stayed with Windows 7, the OS it was designed for.

You both are right. Laptop is an ancient Compaq Presario CQ60-210ES. It works quite well with x86 installed. In fact, factory OS was x86 Vista. I wish I would have been able to fully run x64 to take advantage of full 4GB RAM but it wasn't possible.
And yes, not MS fault either (maybe I was too harsh on them out of frustration). I tested a lot of different drivers for several manufacturers (even Compaq/HP) and none of them worked.