This is the software I use for my video capturing (including the video here using speaker output), CamStudio 2.0. It's free and open source, but it's also long abandoned. It failed to 'record from speakers' on two computers I've used and I've read several claims on the internet as well. It doesn't seem to cope well with newer soundcards.
This video shows the trick I use to force 'record from speakers' to work. I had done this video up as a tutorial, with well placed instructions with to the frame precision. I took 3 hours on it and the numerous calculations ... and my software crashed without saving and in the process of overwriting my old output. So this video will have to suffice for now at least. Just do everything I do (IN ORDER), even closing afterwards is important to save the changes. There's no step here that isn't important.
(Correction, the very last thing I do before closing it off is I go to the menu to show the 'record from speakers' setting selected--I highlight it. This may confuse; I DON'T select it, that may mess things up, it's just to show you it's already selected when you exit the program so DO NOT CLICK on that step.
I think what's basically happening is that started out with the sound options set to another soundcard setting (input, perhaps) it recognises the output when you change it back and do manual line in detection. You have to select the record from speakers setting before manual line detection so that the error doesn't affect the settings, so copying my sequence is all important here.)
This method has worked on my last two PC's, hope you have the same luck.
The CamStudio 2.5 beta branch-off just removes the 'record from speakers' option altogether, hence if this fix works for you you should stick with the official 2.0.
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