Starting from Windows Vista and 7 new sound API model was introduced. There is no stereo mix or mono mix. Instead every playback device can be opened in loopback recording mode, so you can record what you hear from your speakers, headphones, digital output etc. Even if your audio card does not support it, Windows will emulate this functionality.Kind of sounds like that might be what's going on here:
Is this something JavaSound would support? In other words could I use JavaSound to record the incoming sound from a particular device under Windows7?JavaSound is going to use whatever the OS tells it it can use... so yeah, I'd think so.