Stereo Mixer not recording sound.

Hello there,

I have been banging my head against the wall for a couple days here. I've been trying to enable recording and streaming audio through the Stereo Mix device but it doesn't seem to be picking up any sound. I have tried reinstalling drivers, enabling and disabling different audio devices but nothing seems to have any effect.

I have read a lot of posts on different forums but most of them are about stereo mix device missing. Thats not the case here since it definitely is showing up and is enabled.

Any ideas on how to fix this?

**EDIT**

So I've sort of figured out the problem. When I talk through my mic like on Skype for example, the sound level of the Stereo mixer drops to 0. If I then mute my mic on Skype the stereo mixer volume stays at 100. I've been able to Stream music and use my mic at the same time before, or does it drop due to priority? Thanks

I am not home and trying to describe by looking at a Win 8 install:

Right click volume icon on notification area
Select playback devices
Open communications tab
Select do nothing

Thank you for your response!
It's already checked as do nothing.

Here's my Playback/recording devices: