I have a home recording studio using Sonar X1 software.
I don't know about Acid, but it should allow clean recordings. Audacity the same way.
I record, generally, in the -10 level with my recording program, at 24 bits/44.1 Khz. At -10, I have plenty of headroom and can then adjust the levels after the recordings and at mixdown. I export the mix as a standard 16 bit/44.1Khz wav file and then "finalize" whatever I want to do to the song, including levels, with "Goldwave" (an audio editior).
I assume you are converting the audio to MP3? If that is the case, that may be where the distortion is occuring? I find that 128Kb MP3's are very poor and at a minimum use 198 Kb MP3's.