Configure Microphone just brings up the "speech recognition" software, and offers no ability to make the USB signal a "line level" equivalent. I repeat: In the previous Windows XP implementation of the generic USB audio driver, there was a tab with a selection button marked "USE LINE LEVEL FEATURES ON THIS INPUT". No such option exists on the Windows 7 USB Audio driver. They just assume that all USB devices will be microphone level.
Fireberd: I think you missed my points entirely. I am NOT using a MICROPHONE, I am using the USB connection and the driver is assuming (incorrectly) this USB connection to be at microphone level. Typically, microphone levels are about 65 dB below "line level" signals. Microphone levels require high gain preamplification. It makes no sense to have to attenuate a signal by 65 dB just so the next stage can amplify it by 65 dB! This has been a principal of good audio design forever! I do not want to do like you and give up a digital input and go back to using the analog line in. That introduces its own artifacts, principally hum and noise.
For the same reason that analog inputs must have a choice of "mic" or "line" inputs, USB inputs must also have a switch in software that accomplishes the same thing. LOGICEARTH is correct in that a generic USB audio driver has no way of knowing whether the device is a microphone or a line level device, which is why the driver configuration needs to have that mic/line selection, JUST LIKE THE XP implementation did.