Too many variables... could be anything.

I can't believe that a 7 year old sound card sounds ten times better than a modern one, even if the new one is not a high end one.

Believe it. A LOT of modern equipment sounds like crap....especially the cheap stuff.

I remember those Yamaha sound cards and they were nice high quality cards. I think they were like $500+ when they came out. This alesis interface is like $150.

Examine the alesis. It's a USB powered audio interface with 2 mic preamps with ADA and SPDIF and comes with cubase LE. Think of what those things would cost individually. Now figure in that both Alesis and the reseller are making profit on the device. You gotta figure that the quality must be really low for them to be able to sell this for only $150.

I'm not being a gear snob here, just trying to explain how the quality of the io|2 may not be up to your expectations.

It is possible that the problem may be somewhere else but I doubt it. If all you need is output, check out the Echo Indigo. I've used it and it sounds nice. If you need pre amps, check out the EMU 1616. I've never used that, but I have used the 0404 and I like that one.

There is something to be said for older equipment. Some of it is fuzzier, mushier, warmer and so some of the old junk, can make your stuff sound better than some of the new junk. New does not always mean better but it may have been less expensive to manufacture.

I find too much of the new stuff to be too crispy, too metallic, too brittle, too sterile. If that's the flavor that you like, go for it. If not, look into some of the old stuff?

What is old is new again
Ms. Remy Ann David

Not to point to something overly obvious but, have you tried rebooting? With USB devices, an error in any audio program will cause your input sound to suddenly degrade to virtually pink noise. Your system sounds will be fine but if the device drivers have encountered an error it will sound like excrement. I would start there. You said that at one point it sounded quite good so I don't think it's a permanent problem.

I was amazed how bad it sounded. It never sounded good. Sorry for the confusing word placement.
So the picture is this: I've created 14 tracks of (superb) music using the SW1000xg card. Now I want to perform them live using computer as a playback device. I need pre programmed MIDI control for guitar pres and effects. Other wise I could use any CD/mp3 player. Now I'm choosing between crap playback sound and 'hands free/feet free' guitar playing comfort.
When eq:ing the output of the io2 the result is barely bearable. I couldn't agree more with RemyRAD. Cold and dead.

out of curiosity are you using an external drive?? a lot of laptops use 5400rpm drives that have throughput problems...just one of the variables aluded to...

No I'm not. I only hooked the io2 to my desktop computer so far, to test how it sounds. I've got a dedicated audio drive (7200). I'm running Sonar 5.0 and Sound Forge 8. I haven't tried how the io2 records. I didn't buy it for that.
I wonder what's the price range I should be looking at if I actually want to improve the sound quality from SW1000xg. I'm not impressed with the Emu range either. Be it an external or internal interface. Stereo in/out and MIDI is all I need.
The stereo imaging of SW1000xg is exellent. All the instruments sit tightly where I pan them. The internal effects section is also up to it's task. Sometimes it can sound a bit soft but I can well live with that.
I do a lot of MIDI to audio conversion. Say I have a MIDI track playing back internal drum kit sounds. I then take e.g. the kick and have it on a separate track alone. Then I solo that and record it onto an audio track. That procedure gives me all the audio tools to tweak the kick sound with (compressor, distortion, eq etc.) Endless fun. I'm very happy with the end results.
I use to think that computer peripherals outdate in a year or two, new gear having it all quicker and smoother. But the 500+ spent seven years ago still breathes strongly today. I will cry when my SW1000xg finally dies or pci bus gets finally out of fashion.

Check out the Echo Indigo. It runs around $200. It doesn't have a MIDI connection but you can pick up a cheap USB MIDI interface that will do the job well.