Hi Bonzo
Been through this myself lately. The problem began with Vista and continued with Windows 7 when Microsoft decided in their wisdom that people were recording audio from the Internet instead of buying it - as if any self-respecting Mudcatter would do such a thing!

Prior to Vista pretty well any recording programme would record "What you hear" then - zilch! Progs show "Mic" as the only device available!

I sought advice on Mudcat and go lots. Some folks assured me that certain programmes would work but when I tried them, sadly, nothing.

After sampling lots of Freeware from the very complicated to the very simple, including some which worked for a few weeks then mysteriously ceased functioning after some "Essential Upgrades" from our friends at Microsoft, I'm currently using Sound Tap http://www.nch.com.au/soundtap/index.html Blue clicky doesn't seem to be working!

This is a very small and simple programme which does exactly what I'm looking for. I use an elderly version of CoolEdit (now superceded by Audition) for editing.

Lets see how long this lasts for.

Good Luck

Eddie