This page will show you everything you need to know about recording and editing in Pyro.
Choose Start | Programs | Accessories | Entertainment | Volume Control | Options | Properties. Click on Adjust Volume For Recording, and make sure all boxes below are checked. Click OK, and locate the Line In and Mic sliders. Make sure the Select boxes at the bottom are checked (you may only be able to check one at a time - check the one appropriate for your purposes Line In). Close the window down and try recording in Cakewalk again.
If none of this works, try recording in Windows Sound Recorder (Start | Programs | Accessories Entertainment Sound Recorder). If you cannot record in Sound Recorder, you won't be able to record in Cakewalk. I'd then have you speak with your computer vendor's technical support. Once they get Sound Recorder working, Cakewalk should work as well.