IvanB, You are absolutely correct. The process I described requires a bit of trial and error-ing in terms of setting the gain (volume) level of the receiver's output into the sound card. I know that Goldwave (and I'm sure other programs) have VU type of meters that allow you to visually measure the signal input strength and make adjustments accordingly from the receiver. One might have to do several trial runs with a given sound to get the right balance level. Bear in mind too that hard drives tend to record things a little hotter than the VU meters show while the actual recording process is taking place. Therefor the signal should be adjusted so that it's nearly peaking towards the peak indicators without going into them. Too much peak and you have distortion. Not enough signal coming through and you have additional noise/hiss. You have to play around and fine tune this stuff....but it works very effectively.
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