USB option not displayed in Recording Device: drop-down menu

Is the USB cable attached tightly? If you have a different USB cable I recommend trying it.

Otherwise all you can do is try all the steps in the green panel “Detecting USB and Firewire devices” here: Audacity Manual.

When I suggested using the computer microphone input, I meant connecting a stereo to stereo cable between the external mic input and the T2MP3 audio output (in case that wasn’t clear).