When recording does not record the user interaction with the web page, please check (and ensure) that the browser's web proxy settings are configured to not use a/the web proxy server for the loopback network addresses (localhost and 127.0.0.1), because this is not supported with Squish for Web and the browsers which are used directly (instead of the proxy server mechanism in Squish), so basically Internet Explorer, Firefox and on OS X Safari.
If in doubt about this please contact your IT department to find out about the proxy server configuration in your web browser.