When you checked out the speaker in the task bar, what you probably needed to do was to right click it, and choose 'open audio controls'.
On the options tab, select 'properties', then select 'recording' and then click 'ok'. This will show all of your incoming sound options. Make sure the item you are trying to record with is checked in the box at the bottom.
If this is not the problem, there are probably quite a few other reasons it is not working. Could be something in the playback configuration as well.
Good luck,
Micro