I have a cassette to USB device but this also happened with a USB turntable: I press the Audacity record button and press play on the device. The playback gives me room sounds and a faint audio signal. In fact, if I press record without even turning a device on, it is as though I am recording with a microphone because playback will have my tv or whatever is audible in the room. My computers are all Windows 7 and I am using the most recent version of Audity.
Thank You!