I have come across a similar problem /w my Audigy Platinum card... the solution was to go into your "Sounds and Audio Devices" settings (in Control Panel) and enable, then disable the "digital output" option (checkbox) under the "advanced" section of the main audio volume fader.

Not sure if that'll help you at all, but if i don't do it, it sounds like the incoming signal is being doubled, slightly out of phase with itself making a thin/harsh sounding recording.

-Dave