wutske, how about sending us a screen shot so we see if you have some other setting for the same purpose?
Not that I'm insulting your intelligence or anything... but maybe someone else might see something you've missed.
Sten, I'm glad my instructions got you where you needed. This issue troubled me for a long time a while ago...
But after re-reading your original post, I would just like to point out that maybe there is a more "formal" way of extracting audio from FLV files (the format Youtube uses for storing videos).
Actually, a quick search on Google revealed
this tutorial, that describes
just what you need, but the program in use there (you can find a link for it at the bottom of the page) is not free, although it has a trial version from what I can tell.
Another option is extracting the FLV files from Youtube, using a program such as the
VideoDownloader Firefox Extension that lets you download movies you are watching, or if you're not using Firefox, you can try
this or
this (though if you're not using Firefox, I would suggest
giving it a try 
) . Now that you have the FLV file on your computer, you need to convert it to AVI, or whatever other format you can extract audio from:
this page has
lots of articles on video conversion. Just select "FLT to ..." in the Format Conversion field. Now that you have your desired video in a more popular and well-supported format, you can extract audio from it! I do believe that you can use
VirtualDub to process AVI files, and maybe
VirtualDub-MPEG for doing the same thing, but with MPEG files.
Using these methods is probably a bit more "cleaner" and correct than recording your computer's sound card output... but maybe it's a bit of overkill for whatever you're trying to do. I think that lots of static noises and "hisses" can be prevented, because sometimes the long path that the audio makes from Youtube all the way to your sound card, and then back to the recording program can be a bit degrading in terms of audio quality.
You just need to remember that Youtube videos'
audio quality is really not that high to begin with, so if you want better sound from Youtube videos, you need to either download the song (if it's a music video) or contact the video's author.