A. Since you're using a PPC based Mac, this is as it should be. If you don't have a FireWire or USB device plugged into your Mac, then the only options to record with are the Built-In options, and you define what "Built-in" means via your System Preferences. In your case you want to set it to use the Line-In. Had you wanted to use the mic in your computer you'd set the System prefs to use the Mic.
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GarageBand from Apple Computer uses audio loops and MIDI loops in Apple Loops format. It can work with Audio Units plug-ins. Apple Macintosh Compatible FireWire and USB interfaces can be used to connect Audio and MIDI instruments to your Mac, and be recorded into GarageBand.
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