I don't know if it's your recording levels or the POD itself? My experience has taught me to lower the gain on the POD when recording for better clarity and definition, actually, that's probably the case for most amps anyways! So, give it a try, I'm not sure if thats the digital distortion your hearing or not but there ya go.
I did get the "distortion" problem fixed. Lexicon tech support has been very informative and professional. I had to change bit size from 16 to 24.
I'm not the greatest fan any digital amp. I have used tube amps my whole life/career. The POD is great for volume levels and portability. I can't put two full stacks in the back of my SUV.