Graham,
I see your still having problems with this...and I see you're still stuck thinking it's the mixer control.
Listen, many of us use soundblasters. I currently use a Creative/Ensoniq Audio PCI (same mixer as the PCI128), and have used the Soundblaster PCI128, Soundblaster 16, and for a short time the Soundblaster Live!
There is nothing special in regards to setting up any of these cards for recording stereo. The line in plug is stereo, and that's all there is to it. There is on occasion a balance control for the Recording Line In slider...but you'd probably never use it.
If you've already tried reinstalling the drivers....then the issue is most likely with CoolEdit. Sometimes it's easy to miss something in these multitracking software packages....the learning curve is a bit steep.
The only alternative is that your soundcard is busted...but since you can monitor the source in stereo, it's probably software.
Also, verify that you're really plugged into the Line In and not the Mic In...they're not clearly labeled. If you're plugged into the Mic In port, you'll hear the sound out of both speakers, but it is a mono source so all of your recordings will be mono.
Slackmaster 2000