Oh... are you saying you're trying to use the 'record' button in audacity to capture from your MD? I've never tried that - I have a JB3, and do USB transfers. I had just assumed you'd already transferred the file, and were using audacity to edit/master...
There is a config setting: file > preferences > audio i/o, default is mono, try changing this to stereo and re-run. Let us know if this helps.
best regards,
stephen