I have done it... But its a real pain, but it requires just one program: Audicity !
Google it for the program, its completely free.
You open it, turn down the sound from the computer to about 30% and Media player down or the program you use, and record first and then play, don't do anything. When its done, you stop it and with Audicity(Its a sound editor... very nice some say its close to Sound Forge) and clip it to the right length, and use the little... What do you call them they look like 2 mini baseball diomonds in the upper left corner, then export as a mp3, wav, or ogg vorbis. You first need the lame_enc.dll, seperate, but its pretty easy.