WM Capture Error: "Cannot connect audio to wave parser", "Failed to set up recording"

[Rocco]

When trying to capture screen videos with WM Capture a pop-up says "Cannot connect audio to wave parser" then "Failed to set up recording". I went thru the audio setup numerous times.
The sound on my PC is active and volumes are all max. with none muted.

It used to work but no more. What's the fix? I purchased this in Sept. '09, is there an update I can download? Please recommend a site that has a video that SHOULD work to check this out. Thanks.

P.S. Are there sites that block this application?

Thanks.