Well Vice, this doesn't have to be a major upgrade for the sound card. For $25 - $45 you should be able to pick up an Creative/Ensonic PCI soundcard or a SB Live! Value. Either of these would be a step up from what your currently using.
But as to your current soundcard, it has a mic built-in? That's pretty cool, but probably part of the problem. Can you disable the built-in mic? You really should be recording signals in to the Line-In on your soundcard, not mic-in. Double click the Volume Icon at the bottom right of your screen, by the clock. See if you can disable mic there, you should be able to and just activate line-in.
If you don't see it there go to Options>properties>recording and put a check mark on it.
All I can think of for now.
Emeric