The only problem I've had with audio while running Graal is the recording quality. On two Creative cards (Live! 5.1 and X-Fi) it's done that, but using the Kx Project drivers stopped that, as well as nearly every audio-degrading problem I've had. Creative has gotten themselves a reputation for buggy drivers and software from what I've read, so considering those two things, it's likely the driver. The Kx Project drivers should work with your card, so maybe check that out.
www.kxproject.com
Before you consider doing that, try turning off (if it's on) the microphone option in Graal and see if it stops the problem.
Is it recording or playback that's getting the distortion? For playback, the only thing I can think of is if the source is set with a gain boost. Maybe you actually have it in the microphone port? Try the other audio-in port and see if that works. My experiences is that with line-in, you'll have to turn up the volume a little more than with microphone, so the quieter one might be line-in.