How Can Get the I/O set right?

I just installed Audacity yesterday.I had to reinstall it because I was using Version 1.2.6 or something like that.almost everything I was trying to do was In Vain.Most of the interface Option were Greyed out.
I went to a help Lobby in a ChatService and the dude told me to install another version.I downloaded it and installed and this one has all the functions.
Now here’s the problem:
First I had a delay when I was recording into it.This was insane and I could hear my voice as I was recording.Not only could I hear my voice but it was delayed so it came back to me and confused me.I couldn’t keep time.
So When I went to lay track 2 down and try to add to it and “sing along” to the first track the delay was once again insane and I could not do it.
I asked a friend what to do and he said it had something to do with Buffering.
so I came to this forum (well I don’t know if it was this particular part of the forum) and someone had an asnwer for someone with a similar problem.
he suggested Going to the preferences and “turn off” or “undot” Software Playthrough(play new track when recording or monitoring),and Leave Overdub on (Overdub:Play other tracks while recording a new one).
Then when I was recording I couldn’t hear myself anymore going into it and I could hear track 1 playing while recording track 2 to “match” with it.Like a 4 track:Just adding track 2 like adding a solo over a rythm.
Seems to work but still I can’t record and hear myself as I record with the first track playing along.
This means that if say I wanted to use line in and have an effect on the guitar or whatever (like Distortion,etc.) I wouldn’t hear my distortion as I am playing into the Program;I would only hear my unplugged guitar…Nothing being monitored so I would have no Idea how it sounds.That simply won’t do,it defeats the whole purpose of what I am trying to do!
Help Me Someone!
I know this program is cool and I have 3 months to put out a Solo Project and I cannot buy any software.This has to work!
Also,I just looked into the Preferences and I noticed something…
There a Latency Part of it.At the Bottom of the Preferences screen.JHaving to do with Buffering I think.
Like Audio to Buffer set to 100 milliseconds by default and Latency correction set to -130 milliseconds.
Does this have anything to do with the Echo when I was trying to Record and kept having the Audio Bouncing back at me with a delay?
I don’ t understand!
Please Help me!
PS:I don’t know how to use this forum or if this message will actually show up so My email is if I don’t see anything in the fforum.I will check my email too if someone cares to drop a message there.
Thanks again!

You probably had Audacity in “Pause”. Most of the menu options are only available when playback is stopped. They are not available while playing, recording or paused. The same is true for all versions of Audacity.

That is correct.

Audacity does not do real time processing. If you want to add effects using Audacity you record the “clean” sound first, then add the effect after the recording is done.

If you are using an internal sound card, and if you are using Windows, you need to open the Windows Mixer (loudspeaker icon near the clock in the lower right corner of the screen) and enable (un-mute) the input that you are using. This is not really anything to do with the Audacity program, it is to do with the computer sound system. If you are recording from a microphone you must monitor with headphones and not loudspeakers. If you enable the microphone input to play through loudspeakers then you will get feedback - the sound from the loudspeakers will go back into the microphone, get amplified, back out through the speakers and into the microphone… and produce a loud squeal.

If you are recording from an external sound card you will need to monitor from the headphone socket on the external sound card.