With the distortion as bad as it appears to be, even if you don't have a decent soundcard, I would still try it as a test so you can at least see if the problem is Sonar or your AKAI EIE Pro.  If the distortion remains when using the sound card, then , I'm afraid, it looks like it could be a faulty AKAI EIE Pro.  It's worth the test, even if to eliminate the AKAI EIE Pro

Ricebug
AKAI EIE Pro 96khz digital interface

Are you actaully running that interface at 96kHz? If so, and if this happens again, you should try lowering it to 48kHz. The extra CPU and disk load of running a higher sample rate could be contributing to the problem.

brundlefly

Ricebug
AKAI EIE Pro 96khz digital interface

Are you actaully running that interface at 96kHz? If so, and if this happens again, you should try lowering it to 48kHz. The extra CPU and disk load of running a higher sample rate could be contributing to the problem.

That's a good point, the EIE may not be able to handle the I/O, making it an EIEIO problem.

You really should run Latency Mon. 
http://www.resplendence.com/latencymon
 
And this was most likely a DPC issue due to the wireless.  

After perusing the AKAI EIE Pro's docs, it appears that the sampling rates (44.1 kHz, 48 kHz, 88.2 kHz, 96 kHz) are at the USB end, meaning, it's software dependent. IOW, there's no switch that allows me to manually change the sampling rate; it's whatever Sonar is feeding it. I have Sonar set at CD quality.
 
 

See the Default Sampling Rate setting in Preferences > Audio > Driver Settings.

CoteRotie
[...] making it an EIEIO problem.

I am still laughing from this one!
 
Back to the OP... the Melodyne warning was mentioned in a thread long ago (which I can never find again for some reason) as a workaround during beta testing that was subsequently fixed (i.e., no longer necessary). Most users adjust buffers as needed and ignore that window, including myself. I have used Melodyne with very low buffers and not had issues.
 
After I typed the below, something else occurred to me. If you hit the global effects bybass ("E") does it improve playback any? Is CPU spiking on any core during playback? Both of these can indicate plugin issues. Below is more interface ideas.
 
A couple ideas came to mind, first is the audio buffers... I am not sure how invasive Windows is with AKAI drivers, but can try this:

1. Hit the Windows button and type in "Change sound card settings"
2. Select the AKAI and then properties on the "Playback Tab" and match the "Default format" to what is currently in that project.
3. Repeat Step 2 on the Recording tab.
4. Open SONAR, and under Edit->Preferences->Audio->Driver Settings click on the ASIO Panel tab and set that number to something less aggressive (like 256 or even 512).

The other idea is accessing data on the disks. While still in SONAR Preferences, click the "Advanced" button at the bottom and then go to "Audio->Sync and Caching." In the "File system" near the bottom, bump both the playback and record I/O buffers up to 512KB.
 
If you are not seeing actual clipping (pegged meters on playback), it seems more like the above are the culprits.

Looks like the AKAI EIE PRO interface is the culprit. According to my Google research, the drivers are bad and AKAI is more interested in their big dollar hardware. They recommended going back to the old drivers, which I did. Also did a firmware update. No good. Now the mixes are just static and noise.
 
Looks like a Focusrite Scarlett 6i6 is in my immediate future.

I am not familiar with the AKAI line at all, but one thing that stuck out for me was that they recommended ASIO4ALL for their low-end hardware (there was a post regarding this a few months back which shocked me). This threw up a red flag for me as many people's experiences (including mine) with ASIO4ALL is "not good." I am very sorry that you are experiencing this issue, since good drivers are "it" when it comes to an audio interface. This is the same reason I chose to kick M-Audio to the curb a few years back... driver support went south and the unit became worthless to me.
 
I dove into the Focusrite product line a couple years ago based on feedback from this forum and have no regrets whatsoever. I have not used the Scarlett line, but as a brand Focusrite seems to take immense pride in their drivers (what matters most).