Actually I recommend you use Audacity, much simpler, very clean interface.
http://audacity.sourceforge.net/Remember to go to the preferences and allow software playthrough (it plays what you are recording while you record it). Also remember to normalize your tracks when you are done. BUT MOST IMPORTANTLY, go to your system settings and set your input to LINE IN instead of microphone.
And in other news, Line In is a great utility that lets you hear what is on your line in input when you aren't recording. Gives you a good idea of how your music will sound through a laptop with the current gain.
http://www.versiontracker.com/dyn/moreinfo/macosx/18987