Ok, just did a quick test with different hardware setups. 
It is definitely USB related. I only seem to have the problem when my USB port 
is occupied. 
The PCMCIA interface does not affect it. Right now i am listening to XMMS in 
perfect clarity and using this site with my wireless card. However if i plug in 
the USB mouse the sound will begin to deteriorate. (but only after the track 
playing has finished)

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Sound from ES1978 Maestro 2E garbled when USB CD-ROM drive plugged in
https://bugs.launchpad.net/bugs/21057
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