Webcam and audio device not linked (per not found) despite computer having one that is working properly

1. Click on the blue file menu button located at the upper left of Windows Live Movie Maker or as an alternative, press Alt+F on your keyboard.
2. Click Options.
3. Under Windows Live Movie Maker Options, click Webcam to go to the Select an audio device and webcam dialog box. From here you can select from a list of available webcam/audio device.

This does not work. I have nothing under the audio devices settings. There is a down arrow and nothing is there

The webcam is showing as being there. How can one link the computer audio to movie maker webcam

Skype is working fine with my webcam.  I have updated all drives and done everything suggested. It is a resistant program movie maker. What other alternative can I use for making movies on my computer?

cheers Michelle