And the answer is...
OK, I have the new 15" retina display macbook pro running 10.8.2
I installed a "gifted" copy of Rosetta Stone v3.4.5 for MAC
When I set up the program there were no Microphones to choose from. I tried everything, sound flower, Linein, I set it up to the 44.4 hz thingie, and pointed it to my logitech h540 USB headset. And this might have all worked except....I had done one last thing before I had set up the sound flower....I went to the Rosetta Stone support page and found an update that they had recently released. I was afraid at first to do the update, because I was afraid it would mess up my 'gifted' copy of Rosetta stone, (I didn't have an activated version) . But, what the hey..I tried to download it and it installed. Now, I had soundflower, and linein all set up...my headphones were plugged in, the update was downloaded...time to reboot...I did so and
Voilà! Suddenly Rosetta saw my internal microphone and the Soundflower Ch2 and Ch64. I chose CH2, as suggested above...set up the microphone 1,2,3,4,5... and it worked! Except the sound was going in through the Logitech and out through the computer.
So, I deleted Soundflower..and Linein...unplugged my Logitech headset...reset my microphone in Rosetta to Internal Microphone...then went back to my computer Sound Setup and made sure everything there was pointing to the internal microphone......Back to Rosetta, and I was up and running. Next I plugged in a set of Apple earbuds...from my old iphone 4s...and the whole thing WORKS! yeah!!
Bottom line...skip the Soundflower and Linein...and just install the little update for version 3...even if you have a 'gifted' copy...
Here is the link for the download for the MAC update for Rosetta V3 or V3.4.5
http://success.rosettastone.com/art...3-Latest-Application-Versions/?q=Text&l=en_US
Au Revoir