use the "What U Hear" channel
Try it with the "Wave" channel too, if possible. It may differ for you, but I get extra hiss via "What U Hear" that is absent in Wave. If you bought a soundcard then you probably got some better recording software than Sound Recorder.
If you're still on the look out for good, free conversion software then http://www.dbpoweramp.com is cool (and has MP4 support). I'll have to check out OggDrop.