I'm just trying to record some sound from a source that is plugged into my internal soundcard on my Powerbook G4. When I go to the multi-track view, I see a dB level, and only until I select Input 1 do the levels rise and I hear music. This is great and everything, except the REC function goes away. How am I able to record the sounds?

What do you mean by it "goes away"? What exactly does it do?

When I select Input 1, the REC button does not appear anymore.

I think what you are doing is selecting an "input" object not an "Audio Track"

You can't record enable an "input" object.
You need to record to an audio "track".

Select an Audio track object and on that above the meters you will see that you can define the input and output source/destination.

You can also define whether that object is mono or stereo by clicking on the button on the left of "REC" enable.

HTH

Matt