are you sure you understand the difference between MIDI and Audio?
As isteveus pointed out your keyboard is sending a MIDI signal and not an audio signal. Therefore it only works on a Software Instrument Track in GB.
One important concept to understand is:
Your operating system has to "see" your external MIDI device. GarageBand "asks" the operating system if there is anything available and if yes, then you will see it in GB (check preferences Audio/MIDI).
If for any reason your operating system doesn't "see" your device then it's not GB's fault.
Open the "Audio MIDI Setup" app (inside the Utilities folder inside the Applications folder). There you can see what (audio and MIDI) devices are recognized by the system.
Another quick check is to plug the USB device in and out while GarageBand is open. If the system (and GarageBand) recognize the Device then you get an Alert that a MIDI device has been added or removed.
It seems that this type of question and confusion comes up a lot on forums. I cover that topic in details in my manual "GarageBand 11 - How it Works (see link below). I use a lot of diagrams and graphics that helps to understand the underlying concept so its easy to quickly troubleshoot these problems and go back and concentrate on your music.
Hope that helps
Just to be clear, you're saying that even though the keyboard is connected via USB (not the MIDI Out also on the back of the keyboard) that it sends MIDI. (Seems like there should be an icon for Keyboard Input Device showing up in the System Prefs Window, just like the regular keyboard, mouse and trackpad have.)
Anyway, I've opened the Audio MIDI Setup app. The keyboard controller doesn't show up in the list in the left column, just AirPlay, Built-In Mic, Built-in Input, and Built-in Output. I see no way to scan for the keyboard. It doesn't show up no matter which of these four options I select.
I know about the Audio windows you so kindly included. Been there many times and plugged and unplugged the device before and after GB was open. No dice. Beginning to think the controller may be defective.
Just discovered that Audio window of Audio MIDI Setup opened by default, but that there is a choice for MIDI setup under Window menu. Looking at it and trying things, like "Add Device." That makes an icon show up, but it seems to have nothing to do with my keyboard. Tried Test Setup to no avail. Already showing are icons for IAC Driver and Network. Tried Rescan MIDI and nothing happened.
You are still confused about the topic:
You are dealing with a USB MIDI keyboard, that doesn't send out audio data so don't look at audio preferences (built-in audio, Mic, Airplay, etc)
The MIDI data is sent via MIDI port (8-pin connector) or a USB connector. Macs only have USB connector so you connect the your MIDI keyboard via USB. If it has only MIDI connectors then you need an additional MIDI interface that converts it to a USB signal.
Now to your trouble shooting.
As I pointed out before, first check in the MIDI window of the "Audio MIDI Setup" app. If you don't see an icon for your MIDI device then OSX doesn't see it (IAC and Network are always visible). You don't have to manually add a device to it, it is recognized automatically. If not, then there are a few reasons:
Connection: Your device is not properly connected
Driver: OSX requires a separate software (a driver) to recognize some MIDI devices that don't follow the standard OSX protocol. That driver is either not installed or not up to date. Check your device manual if you need one and where to find it.
Hardware: Maybe you have a hardware problem. The device or the connection are faulty.
Hope that helps