Hello,
I stumbled upon a lovely aflatoon sound capture utility called outrec that records live sound playing from the audio out. It is simple and no-nonsense and has good recording fidelity with no adjustments required.
http://www.omgubuntu.co.uk/2010/07/quickly-record-soundcard-output-in-ubuntu...
The instructions are simple. first download all the dependencies by copy and pasting the _complete_ sudo apt-get ...... command as shown in the site. Then click on the blue download link and again click on the download now link for ..._all.deb and save the deb file. Run 'dpkg -i ....._all.deb' from the saved location. The link for outrec will appear in the Applications -> Sound and Video menu. Just press the record button to start recording and click on mp3 or ogg for the type of save. The file will be available in the folder called outRec in your home directory.