I'm not sure Windows 7 sound recorder will allow fairly lengthy recordings.
Look at other recording applications, such as Audacity, a free download.
Experiment with microphone placement--near your mouth, farther away, etc. This would be my first move.
You can try other headsets, but I wouldn't spend much money on them. And it's tough to tell which would work best without experimentation. I wouldn't run out and buy a $100 microphone.
Keep your expectations for sound quality fairly low. Don't expect miracles.
Make sure you are not using any type of signal processing during the recording. Use that stuff only on playback, if at all.
Don't have a bunch of other applications running when you are trying to record.
You may be able to improve the sound quality to some extent after the recording is made by using an equalizer or other processing. You can certainly make it louder, using Audacity or any similar application.