I had to update my PCTV app to latest version,prior to performing this update I sat with pen+paper and wrote down each permutation of Line In,etc and tried lots without any success.Once I used the Updated app,the sound started working(but not in VCR mode,to get that working I installed a SoundBlaster card)It also refused to work correctly until I downgraded DX to 8.1,from DX9b,which was easy to do as my OS(XP Home)crashed and was beyond "Recovery" or "Repair".
The small wire with jack plugs at each end.. is the audio link wire . without it nothing ..your sound going by your post is on board (motherboard ) type. This causes complications due to the length of the original wire ( approx 4 inch )and the need for it to plug between the PCTV card in the PCI slot & mobo input socket being upto 8 inches away... When your recording from Vcam you remove the PCTV sound link and input the camera to the same Mobo input (LINEIN) you should then get the result you want. You should be able to find a cable from Maplins /Tandy store . I forget what size plugs on it but they should be able to advise if you tell them its for PCTV card audio lead..