Check the 1:39 point in this video  http://www.youtube.com/watch?v=gfLLcHN31dc
 
It looks like it evaluates from when you first click it until you click it a second time... so click it once, play as loud as you possible can (when recording OD), then click it again.

A few thoughts.

If you get the same unwanted distortion from a POD as from a recording of your amp and speaker and using a different guitar makes no difference either, that would seem to mean that the problem has to lie with either the interface or the cables used.

When recording with the POD how were you monitoring yourself playing?

If you didn't monitor using Sonar's track echo could I suggest you try that and see if it makes a difference or if that has the distortion?

Overdriven guitar has more and different harmonics to a clean sound. Can EQ be used to filter out the offending frequencies?

Couple more questions, are/can you monitor your signal going in through headphones to hear what it sounds like as you play (both input monitoring through just the interface and also sending out to sonar and back through the phones)?
 
If you export your track to a wave or .mp3, does it display the same (unwanted) distorted characteristics when played by something outside of sonar (preferably using onboard sound if its not been disabled)?
 
These two things can help identify whether or not the interface is the issue.

Hi Greg,
In digital recording it is often preferred to record a clean, dry, direct signal even if you already know the tone you want from the very start of recording. Many people like to experiment with different tones and effects after the recording is done, and if you record your signal with overdrive then you are married to that tone throughout the mixing process. That is not the solution to your problem, but merely an observation that comes from experience.
 
Most of us have VST plugins like Native Instruments Guitar Rig and we just plug straight into our interface (if you have a hi-Z Input, and the Octa Capture does), add a VST plugin, dial up a tone for recording purposes and play away. Only the guitar gets recorded, and then you have a basic tone which you can embellish with processing and effects afterward.
 
Now that I have mentioned hi-Z input the thought occurs to me that there might also be an impedance mismatch that is contributing to the distortion. That shouldn't be a problem if you are just running microphones into pre-amp inputs. Pre-amp inputs will have input level adjustments, sometimes they will have pads, and sometimes they have phantom power. All of these need to be set properly to get good results. A typical starting place will be phantom power off, input level at zero, and no pad engaged. Check the settings on the microphone pre-amp inputs.
 
Okay, I just took a look at the Octa Capture. Make sure the 48v button is not engaged. That is the phantom power indicator, usually not necessary with the kind of dynamic mics you would use to record a guitar amplifier. Use either input 3 or input 4. These are for microphones, not for instruments. Make sure you move the input cursor over to the input 3 or 4 (whichever you are using), and adjust the input level. I would start all the way down and increase gradually. Monitor the input with headphones. Set the headphone level at 12 o'clock. That should be sufficient to hear without blowing out your ears. If you get a good sound through the headphones, the problem is not your interface.
 
This process of elimination will help you narrow down the problem.
 
Hope that helps,
Paul 

mettelus:  Thanks for the video!
 
tlw:  I'm not sure what track echo is.  I'll have to look that up. 
I don't know if EQ would help this.
 
dwardzala:  When I record direct, I just listen through my monitors.  I only use the headphones when recording my amp or vocals.  
Yes, if it sounds distorted in the track, it sounds distorted when I convert it to mp3.   It is recorded with the distortion.
 
Thanks!
Greg

I went ahead and ordered a new interface.   If it's not the interface, then I can send the new one back and put that issue to rest - and go from there.
 
Thanks!
Greg

Which audio interface are you getting?

Not reading three pages of buffers and interfaces and latency, and who knows what other misdirection.
 
Everything records fine till guitar w gain. Not latency, not CPU, not buffers, not audio interface, not interstellar gravity waves, or even the polar vortex, CLEARLY, the problem MOST LIKELY resides with the audio chain for the overdriven guitar. Schroedinger's Cat says most likely at ONE location in the chain.
 
Work it. Top to bottom. Is it the same guitar that records clean when clean? Same stomp boxes? Same preamp? Same main amp? Same mic or DI box? Same outboard? Comps, EQ, verb delay? ( look to any attack settings on your compressors if used, try slowing the attack) same inputs on Sonar tracks. same bus structure, same FX in the bin?
 
Where can you meter the signal, and more importantly, where, at what potential gain stages are you NOT able to meter? I will guess that one of these areas is where your problem lies, because red on the meters suggest blood, which we are tuned to for aeons, and you'd have noticed it.
 
So you are going to have to get creative, and forensic.
 
Break off pieces of the chain, bypass them, bring the guitar closer, wiring wise, to the hard drive write heads. Keep shortening the signal path till the distortion goes away, and note which was the last device or segment of signal chain removed just before the distortion went away.
 
You'll find it. IF and ONLY IF you approach this with a clear head, a notepad, a clear plan, and you follow that plan start to finish before going off on any wild goose chases. Resolute discipline. Quiet surroundings. No time pressure.
 
WHEN you get it right, your confidence will increase to allow methodical solutions to other problems in the future.
 
Keep in mind...this is a big part of what recording is all about. Anyone can press the red dot. Anyone can plug A into B and get something on tape. Most will live with any and all compromises inherent in the simple system. Engineers, Producers, and Artists, successful ones anyway, are all about negating or removing those compromises, which usually adds complexity to the system, which requires discipline and orderly approaches to resolve.
 
Enjoy the process, and take no prisoners! Victory or death!

thomasabarnes:   MusiciansFriend had a Stupid Deal of the Day yesterday with a Presonus AudioBox for $99.   So I figured I'd try it just to see.
 
Jay Tee 4303:   I'm not sure you've read all my posts.  When I record, I do not use pedals.   The issue is not just with my guitar amp but also with a POD - going direct.   I don't use any FX inside Sonar until I mix and master.   So that's not the issue.
 
I have used 2 different mics with 2 different cables.   I have used different speakers with my amp as well as different cables and different guitars.   
 
I have not used compression so far.    So I've been going through my chain and eliminating things.   But so far, nothing has helped.  So a new interface seems like a logical step.   If it's the interface, I will know.   If not, then I'll go back and re-check everything else.   At least this will definitely eliminate a source, which is a step in the right direction.
 
Thanks!
Greg

Something I forgot to mention.   Someone posted something (I looked for it but couldn't find it) that said to check the recorded clip to see if the top of where it distorts was cut off.
It is cut off.     What would this mean?
 
Thanks!
Greg