Onboard audio is one of the problems.
I hate to break it to you, but if you want to record, you need to spend some more money.
Buy ART USB Dual Pre online at Musician's Friend
Buy M-Audio MobilePre USB online at Musician's Friend
Either of those two will give a major boost in sound quality compared to
the onboard, and support 48v phantom power.
Onboard audio is crap for even just listening to music, and even worse
for recording.
The hiss you hear is a result of the onboard sound, it just cant cut it.