http://www.engadget.com/entry/5843952395227141
http://www.ipodder.org/
http://www.podcastcentral.com/

Hopefully one or more of those will get your answers for you.

Thanks for the links TJ....but I'm okay with the podcasting side of things. It's the recording me talking to someone else through chat that I can't do! I don't have a mac either and most of them are aimed at mac users! Thanks for your help though

Check out this link and see if it is what you need: http://www.zefhemel.com/archives/2004/10/11/how-to-create-your-own-podcasting-show

He also could only find Mac info, so he figured out how to do it with Windows. He says, "Go to the record control screen and select the 'Record master' volume control as the active one. This will make Windows record all audio being played (including media players, but also MSN logon sounds, so be sure to switch that kind of software off during recording)."

That sounds like what you want.

I also found this program: Pod Producer.

I don't know if it will do what you want, but it looks interesting enough to experiment with.

One of the screenshot captions says, "Here you select the input source (Stereo Out, What you hear, Stereo Mix) and ... MP3 mono or stereo and bitrate."

I'm wondering if the "What you hear" setting would be what you need? (Sorry I can't test it for you. My main computers are Macs, and my Windows system is too old. )

Thanks so much for your help Gene! The Pod Producer works a treat! Not for me....but my friend got it working no problem! So we are all up and running yay! Thanks again! It is really, really appreciated!

Sally my dear girl, how the bloody hell are you?

We must begin talking again, who knows, perhaps that mounting session can still take place at my estate this summer.

Thanks so much for your help Gene! It is really, really appreciated!

Anytime.