I assume that in step 1 you mean “playing the conversation track in Audacity”.
I don’t think that is possible on Windows, at least not without additional software. Windows does not provide flexible signal routing for Audio. With WASAPI you can record what is coming out of the sound card, but it will record everything that is coming out of the sound card.
If you have two audio devices, then you could set Audacity to play through one while your record the output of the other. It might be a bit tricky to set up so that the two sound cards play nicely together, but I think it should be possible.
Alternatively, you could record your sound effects separately, export them as WAV files, then import them into the project that has the conversation (this is how I would do it).