Effects! Please Help!

What are you doing now as far as connectivity, and give us a little soundcard/computer info.
This should be easy to figure out, with a bit more info.

The Soundblaster live is part of the problem!
There's no substitute for a good soundcard, and the SB Live is a known felon, for recording audio.
The other thing is settings. Go to OPTIONS, AUDIO, and check bit depth, and sampling rate. you'll want the rate at 44100, and the depth at 44. Latency shold be set lower in steps till the playback stops all together, then set it higher till it starts playing again. That's your lowest setting possible, and hopefully it's acceptable.
Your guitar needs a preamp! Anything that will boost the signal. A mixer, a tape deck, effects pedal with a gain control, (even if you don't use the effect, this can help sometimes), anything that will boost the signal from the guitar.
Make sure you are plugging the guitar into the LINE input, and not the MIC input! Also, if your inputs on the SB Live are 1/8" stereo, (and I believe they are), you'll need an adaptor to go from the stereo input to a mono input to accept the guitar chord.
The absolute best thing you could do, is get another soundcard!!!!
There are some great sounding cards for not much $.
I hope this is helpful.

Play around with the Cakewalk distortion. (insert audio effects), It can really be cool for power chords, and distorted leads.
Remember, there's unlimited undo, so experiment.
BTW, I like to right click on the track, and add effects from the drop down, it uses less cpu that way!