Can't really help with the KX drivers
(haven't used them in years), but make sure that any and all playback inputs are muted and everything but the mic is muted under recording.
ALSO is the SB0060 the full live or a cutdown version?
Yes it is the full Live 5.1. problem is that the card is too old and will not be getting any official Windows 7 (or Vista for that matter) driver
. If you haven't seen it, other than the Kx driver this is the only other available for that series of cards, SB Live! series Support Pack 2.0 (04/30/2010) - Creative Labs