Hi,
I will try and tell you this from memory(as I am at work right now).
If you have correctly set the audio ins and outs, then you should click the audio tab in the XG editor and double click on each of the first two audio channels. A pop-up should allow you to select from a list of options, choose audio for both channels. Once you have done this then (if I remember it correctly) you should be able to adjust audio levels with the two sliders (if you have assigned the sliders to level, pan, reverb, echo etc). Remember to pan the signals hard left and right.
Also when the XG records audio to your h/d, if you are not satisfied with the take and delete the channel icon for the wav file, the file still remains on your H/D so remember to go and delete wavs that were not satisfactory otherwise you will soon run out of disk space (I found this out the hard way...)
Hope this helps... good luck