Thanks for all your replies.
It was a problem with alsamixer:
Somehow I had changed 'Input Source Select' from 'Input 1' to 'Input 2'. Changing it back to 'Input 1' allowed me to record from RealPlayer10 (and from a microphone).
Still don't understand the alsamixer settings, but at least it works now
Audacity is brilliant. And, by making a symbolic link:
sudo ln -s /usr/lib/libmp3lame.so.0 /usr/lib/libmp3lame.so
I am also able to 'Export as mp3...'.