Audacity is a free music program, and it has the most direct "record what you hear" option i've seen on a music program - you just select sound input option and press the big red record button.
I've noticed decreased sound quality in the recording though - not sure if other music programs are like that.
I've just Googled and yes, it is a Windows 7 and / or 64-bit Windows problem. There is a workaround but it looks complicated and anyway, l wasn't planning to use Audacity. It was just by way of example pointing at the general 64-bit [Windows] fiasco.
As for Reaper, l'm glad you could make it work. I don't want to buy another program though. Acid Pro really does it for me. I wish l could experience rewiring Reason into Acid Pro like you did - must be quite an experience!