but you don't want to use the microphone socket on the PC... use the "Line in" socket.
You'll need some software to record the audio as it's played into the PC, eg Audacity, which is free, click here
Basically, use audacity to record the incoming audio signal
Save the recorded track as a .wav file
Using audacity edit the wav to create and save a new .wav file for each track, (keeping the original.. don't accidentally resave it as just a single track!)
Use Nero to create an Audio CD
I hope this helps,