Yes, I had this problem, too.
Double click on the speaker on the taskbar, a volume control window will open...
If the Recording and Switches Tabs are not present, click on Preferences button on bottom of Volume control window, click on the checkbox in front of Capture and Analog Loopback. these will now be choices under Recording and Switches Tabs which should now be present.
Under Recording, you may see that the mike icon is muted (red X) click on the X and move the mic slider up.
Under Switches, click on the Analog Loopback checkbox.
In Audacity, goto Edit > Preferences and make sure that your correct sound device is listed under playback and record. You should now be able to record in Audacity.
Malachi 3:10 NRSV
...says the LORD of hosts... I will not open...windows...for you...
Linux user since 2001 pda; 2006 lappy