You may have to enable the Stereo Mixer on your computer and use that as the recording source, if you have to do this make sure you turn off all other system sounds otherwise you could end up with unwanted Windows alert sounds in the audio.
For Realtek HDA sound cards / chipset to enable the Stereo Mixer:
Open Control Panel and select Sound, Recording tab
Right click on the blank area displayed below any of the devices in the centre pane
Check Enable devices and Show disconnected devices
The Stereo Mixer should now appear as a recording device.
There should be a folder in MyMusic called "ITunes music" where you will find all the Albums and tracks from where you can copy a song and paste it into the Music folder in the Media Pool of MEP.