Rory--I use, and highly recommend, Audio Hijack and Audio Hijack Pro by Rogue Amoeba. Audio Hijack will record to AIFF format, which can then be imported into iTunes and converted to other formats. It works great for me.
Audio Hijack Pro adds even more features for people who do this more frequently, or who need more control. You can record, for example, not just to AIFF, but to MP3, AAC, Apple Lossless, and using any number of bit rates and other settings.
Now, as to the issue of getting things you record to show up in the Podcast source, I'd suggest to look at the following thread:
http://discussions.apple.com/thread.jspa?threadID=423862
Hope this helps!
Power Mac G5 1.8 DP Mac OS X (10.4.6)