Sorry about that.
Unlike Windows XP, Vista and Win7 provide provisions for making your own audio source independent of the audio source provided by the sound card. On Vista and Win7
WM Capture uses its VistaAudio as first audio source and the computer audio as the second. XP doesn't have this luxury. You have only one audio source.
In most cases this source has one recording input which can be either microphone or Stereo Mix (speaker sound) but not both. There may be some audio cards that have two audio sources so that Stereo Mix and Microphone can be used together.