Here is a picture of my audio set-up. The resulting webcasting is uploaded elsewhere...
This is my checklist that worked today:

• Reboot
• Start browser
• Open volume control from systems tray. Click on options, properties, mixer device = Realtek HD audio rear output (sound card)
  
• Open Audacity.
  
• Open VAC. Wave in=USB mic; Wave out=soundcard buffer=100 sample rare=44100 bits=22 buffer=16 channels=2 channel config=stereo
• Start Simplecast
• Click Encoders and start all by right clicking on the encoders i already have set up.
• Click start
• Skype audio settings=mic=USB speakers=Realtek HD Audio rear output
  
• Call the patient skype lady
• Check the stream and simplecast to see if both sides of conversation are captured
• Start the recording in Audacity
• Initiate the Skype conference call