What type of computer/soundcard do you have? I also have a blue input jack and it is my line in jack, but I can't be sure what yours is. Anyways once you figure that out open up sounds recorder:
click on the Edit
drop down menu
click on Audio Properties
under "Sound Recording" there should be a drop down menu for devices
Select the device you are jacked into and hit ok
As for Cool Edit Pro 2.0 I am not familiar with that specific program but I am sure that in the preference menu you can also select you record device just do some looking.
After that you just have to play with the levels so you get a clear sound. Usually what will happen is you'll get a very small output level from your guitar because it's not being run into an amp before you run it into the comp. The other way to get a good level of output is a microphone and a mixer but most computer mics blow and most people arn't willing to spend the $80-$1000 for a good mic and mixer. Anyways hope I helped in some way.