My problem was solved by post 
http://ubuntuforums.org/showpost.php?p=2673301&postcount=11 .
Again, I have an SB Live! card.

I went into volume control and clicked on the "Switches" tab and there
was a check box nest to "SB Live Analog/Digital Output Jack". I
unchecked it and the fuzzyness went away.

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[Gutsy] Sound peaks on loud sounds
https://bugs.launchpad.net/bugs/123663
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