Hi Walt,
I have Windows Vista so please keep in mind that my below instructions may vary a little on your system (Windows 7). Overall, though, the general principle will be the same.
Here's how I go about setting BIAB to record a microphone.
1. Close BIAB and RB.
2. Right-click on the speaker icon in the System Tray and then choose "Recording Devices" (as shown on the image below).

3. From the display that opens, I then select the "Recording" tab (#1), choose the "Mic" input (#2), click on "Set Default" (#3) and then "OK" (#4) to exit.

Once all that's done, I start up BIAB and give recording a test run.
Regards,
Noel
P.S. If the above brings no joy, try rebooting your system after making the above changes. Let us know if the above helps.