recording Guitar with fender mustang 1 amp

I have an electric guitar with a fender mustang 1 amp that has a usb output for recording. When I record the sound is badly distorted. The recording device shows up in preferences as “micrphone mustang amplifier”. I am using Windows 7 on an hp laptop. I have tried playing with the recording levels but is doesn’t help. Also what is the difference between mme and windows direct sound as changing from one to the other doesn’t seem to matter.

Make sure [u]Windows Microphone Boost[/u] is set to zero.

Thanks for the reply. I did as you said but it did not improve the sound. I am enclosing a sample wav file.