Similar to http://somethingkindawierd.com/blog/computers/linux-computers/10/2010/fix-ubuntu-10-04-popping-sound-on-macbook/ but I'm not on a Macbook, but a Dell M1210 with Intel Corporation N10/ICH 7 Family High Definition Audio Controller (rev 01) on Ubuntu 11.10.
With stereo output/duplex enabled (default) I get distorted sounds at relatively low volumes, but switching to "4.0 surrond fixes it".
Is this a known bug that still hasn't been fixed?