A friend had this issue last night where he couldn't find Stereo Mix in his recording devices. It's an issue I also had about a year ago and at that time, it took me some good googling before I could find the solution which turned out to be easy. Here it is.
This works on Vista and Windows 7. For XP, you have to make a registry tweak which I know nothing about (sorry!).
Right click the sound icon in the task bar > Recording devices > In the list, right click and select "Show Disabled Devices".
Voilà! If your computer supports it, you should now see "Stereo Mix" appear in your list!
thanks for the tip, if it ever happens ill know what to do
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