Distortion when recording streaming audio

I can load a sound file, and it plays back correctly, but when recording streaming audio I get distortion and varying levels of sound on playback. I’ve gone through all the settings in the help file, but have not found the solution. I’m using windows 7 and have set the compatibility to xp-3. Can anyone help on this issue? (Audacity 2 was installed from the exe file.)

Sometimes the Win7 conferencing services and processing get in the way of a good recording.
You’re using the software Stereo-Mix, right, and not the jumper cable sometimes recommended for internal recording?