I'd recommed updating to the latest version of VLC (2.0.1) as there have been a lot of improvements since 1.1.x (version 1.8 doesn't exist... presumably you mean 1.1.8
).
If you're able to capture audio through Stereo Mix (or Mono Mix) then you might be able to using DirectShow. Or microphone if you want to record that way.
It seems input slave doesn't work very well/is broken so difficult to sync up audio and video. A crude method is to record video and record audio (using DirectShow - select "None" for video device and your desired audio device for audio) in a separate instance of VLC. Then you could sync them up later. FYI if the "Record" button is pressed and it's audio only the files are stored in %USERPROFILE%\Music ("My Music") instead.
You might be able to do something with the bridge module. There's more discussion on the topic here:
viewtopic.php?f=4&t=66515
Cheers, Arite.