Mostly, I am a machinima artist specializing in World of Warcraft content. I am trying to record a sound from the game, however, Audacity is proving to be incredibly tricky. Allow me to demonstrate:

On videos in Youtube instructing me how to turn it on, I've seen other peoples' respond to whatever is playing in the background, however, mine does not. (I mean the sound indicator bars next to the device, respectively)

Now, as you can see here, I have stereo mix enabled, and selected. The first dropdown's got me a bit confused, obviously (MME?) but the rest of it I've fiddled with, and played with, and still nothing. I have all the plug-ins, the LAME, and everything else I need. I used to use Audacity years ago when I had XP as my OS, but now, as you see, it's Windows 7.
All my sound cards are up to date as far as I know. Audacity can record my mic just fine, however, it refuses to take in sound from my PC itself, directly.
This is my computer model:
http://www.bestbuy.com/site/Compaq+-+Pr ... &cp=1&lp=1
In the words of the wise: What do?