If you don;t see your headphones in the list of sound sources, selecting PC Speakers should achieve the same result.
MPEGs don't have regional settings so I'm still not sure which message you are referring to. Can you send a screenshot?
To record a Skype conversation you need to have the correct sound sources selected on the Recorder app's main window. Select your microphone as one of the sources so that you can record what you say and then select 'PC Speakers' or another appropriate output source to record the audio that you are hearing from your PC so that you can capture what the other person is saying.
FlashBack doesn't have any regional settings so I'm not sure which message you are referring to.