I would check to see if the decibel boost is enabled through the input properties and also are you going into a line-in port or a mic port?  Typically, I've found that plugging into the mic port produces less than desirable results.

I imagine that the soundcard onboard is likely to be pretty weak.  If it were me, I would look into a small external soundcard.  Im certain that will make a major difference.

Yeah your best bet is to get a USB Interface, especially for laptop's.... it will cause you a lot less problems and it's not too expensive i hope.. With my laptop, i bought a new sound card for it, but it's not really external, it goes in the PCMCIA slot, it's like the size of a business card and you just shove it into the whole at the side of my laptop and wha-la! you get dolby 5.1 surround and a program with a bunch of effects and a nice line-in port.

Of course i recommended the USB interface which is cheaper, simpler and after reading what you are after, it doesn't seem as you need 5.1 surround sound.