How do I record sounds directly from my sound card?

In my Windows 7, there is a "Stereo Mix" in recording devices. Just choose that as default recording device and/or "default communicating device"(I don't know the exact name; it's in the context menu). Then any program which uses this device will catch what you can hear through the speakers.

In Windows XP it should be the same name. However, it depends on your sound driver, as I haven't see any devices named "what u hear"... Just try to play a music and watch the levels of input of all available recording devices.

Sorry the text above is not well organized... but hope it can help you.

EDIT:

I just saw your last comment... Does Creative have a new driver for your SB Live! 24bit? It seems that your current driver don't have this function.

Try this: go into your audio properties, choose the recording tab, then right-click in the white space within the box which show recording devices. From the context menu which appears, select show disabled devices hopefully, stereo mix will appear.