Line In Audio Distortion

Sure you're not putting it in via the MIC input. Also check line level controls in Audio and explore the submenus -- I've done this myself and wondered why the levels were so low/high when inputting audio.

I know I've got it in the right input. I used this same setup before I installed Windows 7 and everything worked perfectly. I've already tried changing the sound levels in the mixer and looked through the submenus but I didn't find anything that seemed to help. Do you have any specific suggestions for what to look for in the submenus?

Try going into Volume Control, Options,Properties and see if the "adjust volume for" option is set to Recording or Playback.

It's easy to overlook that one.

I'm having trouble finding Volume Control. When I right click on the sound icon in the task bar I've got "Volume Control Options" but I can't find anything that's just Volume Control.

It may depend on whether you have XP, Vista, Win7 -- but there will probably be a control that allows you to select Playback Volume rather than Recording Volume.

Properties should be on the list when you click Options.

Also see if any sound utilities came with the motherboard drivers (assuming it's onboard sound on a desktop).