Have a Dell XPS with the Sigmatel Audio card. Cannot record using this so I bought a USB Sound card. Music plays through it no problem and Easy Audio capture recognizes that it is there but it does not recognize when music is playing through it. The only inputs for the device are Microphone when I think it should be line in.

Any ideas on how to fix?

Try looking in either Xp's sound mixer or the unit's mixer (if it has one) and make sure that nothing you need is muted.