keep the input level on audacity on 1. i do. and your mixer output at about 10 o clock, should be clear and crisp. the higher your output on audacity, the more distorted it sounds, well same with the mixer.
1. go to the volume control panel on your computer. you know, the little speaker in the bottom right hand corner.
2. click on options
3. click on properties
4. click on mixer device
5. change from output to input
6. click ok
7. change recording volume to a suitable level