In my experience this is a hardware issue. The sound is when the input hardware of the PC getting too hot signal and clipping. The first step to try then is to decrease the "gain" of the signal going into the PC. There migth be a volume control on the line out or something similar.
A probable better solution is to purchase a simple external sound ...
Answering this just in case someone is looking for something similar.
I found a great solution that does exactly what I wanted: Synchronous Audio Router http://sar.audio/
Works perfectly for me, plus it's free. It allows me to mix my stream audio in Cubase or Studio One, use my hardware controller and all of my VSTs, which is just lovely.