I bought a video to USB adaptor ($99 Australian - probably about 40 pounds UK). The video cable plugs into this adaptor but the audio cable plugs into the line-in at the back of your computer.
I had a fair bit of trouble with software until I used Windows Movie Maker and then it was easy. I have trouble with sound and I have to make sure the line-in (on the volume control) is not muted before I start recording. This is more than a year after you asked and you probably have an answer by now. If not, I hope it is a help
Brian Reynolds
August 2007