=== Terje:=====
5) I am unsure how to practically go from here to record the Audio music files.
================

8) Which tab/buttons for input in Audiacity (possibly tape/noise 
filters) - I could not find the PCM2902 input or see any sound response
here

I suggest to try Audacity first. In Edit->Preferences->Devices,
Host Alsa, playback device pulse, recording default (or pulse), 1 or 2
channels as desired.
Edit->Preferences->Recording, record on new track (each time you start
a recoding you get a new audio track).
Then, on the main menu, click on the filed that says "click to start
monitoring", this will send input to output, so if your output device
is line out it will come out there. 
For recording, the red button starts recording, the black square button
stops.
The advantage of using Pulse is that pavucontrol will show recoding
applications, you should also see the signal coming in when an
application is recording (has opened the input channel). This can be
seen on the Input Devices tab.

You don't see the device as such, it is "abstracted" by both Also and
then PulseAudio.

=== Terje:=====
9) Would it be reasonable to record and archive in lossless FLAC format
and afterwards convert with ffmpeg? to smaller files format of good 
quality, typical MP3 at 320 kbps (for car usb player) and MP4A for home
HiFi?
================
FLAC is very good, it itself is lossless. Audacity can export to a
variety of formats (File->Export), I usually use mp3 or wav.
Note that if you do a lot of editing on a recording is it better to
save the project, that avoid converting back-and-forth between flac and
the interanl Audacity 32 bit floats.
Audicity is a good editor, you record first, save the original
recoding, then apply filters/effects/cuts etc . Like CinGG, keep the
original intact.

Offhand, I'd say you must have extremely good hearing to hear
differences between MP3 320kbps and the original. For cars, I myself
would not go above 128 kbps. MP3 at 320 kbps is much better than most
home HiFi. And if the source is not digital, (but tape or cassette),
128 kpbs MP3 is already much better than the source material.