[Windows 7. Audacity 2.0.5.] The Sony ICD-SX700 microphone connects to the computer using USB interface. It does not show up under recording devices, but it does show up as an external device with available storage. The Sony manual https://docs.sony.com/release/ICDSX700_EN.pdf doesn’t suggest that one can use the recorder as an input device except to transfer files, so my guess is probably not. However, on the off chance someone has solved this problem… 
Having looked at the manual, my guess is that you are right. On portable recorders that do support use as a USB microphone (such as the Zoom H2), there is an option that comes up when you connect the USB to either connect as a storage device OR connect as a USB microphone. If this option were available on the ICDSX700 I would expect it to be both obvious and documented in the manual.