Question : Transferring from digital piano to PC in Vista

Is there any software that will allow me to connect into my laptop mic input, play something on a digital piano, save it,  then convert that into an MP3?  It also needs to adjust levels so that there isn't any distortion and be compatible with Vista.

I was using Cakewalk Music Creator 3.3 on XP.  It did at great job at this but it isn't compatible with Vista.

Answer : Transferring from digital piano to PC in Vista

Actually your piano should have a "line out" for recording, which is not affected by the volume control -- because put very simply, yes, the volume control is boosting the voltage going into the sound card and too much volume (voltage) will definately cause distortion. If you don't have a line-out on the keyboard I would suggest putting the volume very, very low opn the keyboard and using headphones to monitor the audio.
As to Audacity controlling all aspects of the windows mixer -- no it doesn't.
Go to Start menu and select Control Panel. Then select Sounds and Audio Devices.Under the VOLUME tab select Advanced. This will open up your mixer. If you look along the headings you will see a selection of controls -- volume, CD, Line in etc. You can acutally add to these headings by choosing Options/Properties and just check the box of any desired input that you want to control -- in your case you want microphone (even though it's wrong it's all you've got). This will then appear on your mixer headings and you can control it. You should slide the microphone input right down -- even to zero if that works.
Also a word on impedance. This is a different thing, which in this case you have no control over.
Impedance is the load which the voltage hits on it's journey (like an input) or at the end of it's journey, like a speaker or a set of headphones. The rule is simple, if you drive high impedance into a low impedance load you will drive the signal down. So these days most input impedances are high enough so as not to drive any signal down.