A-a-a-and, replying to myself (as no one else seems to have this problem), I found a solution.
Basically, my integrated sound (Dell offers no Win7 support for my venerable and much-expanded Optiplex 280) offers Audio Out, Microphone, and Line In. I've got a headset plugged up to the mike input (going to see about making Dragon Naturally Speaking work, or XP's built-in sound-to-text recognition), got my radio plugged into the line in, and of course too many speakers into the audio out.
Okay. Win7 makes the microphone the default recording device (dunno why, unless there's always some sound coming in to show it's 'live'), says my line in isn't available, and runs off happily. I originally tried setting the Line In as the default...