I had the same problem and after many days of wondering what the problem is, I figured it out. I was using a regular USB 1.0 cord instead of a high speed USB 2.0 connection. When my friend brought over his controller and I borrowed his cord, which was USB 2.0, I had no distortion at all. I went out and bought a new cord, and my recordings within Traktor are sweet as pie! Remember to set the
Output Routing="External"
Input Routing, all set to "not connected" except for...
"Input FX Send (Ext)=1:Front Left | 2:Front Right.
Mix Recorder="External"
External Input=Input FX Send (Ext).
And you should be all set. Mine is working perfectly after days and days of pounding my head against the wall trying to figure out what the problem was.