Terry,
Perhaps Sonar has correct (not too loud) levels, but distortion seems to be generated before recording :Preamps or mixingconsoles stages (gain). Please listen careful to the fretless or electric-guitar track !

I never noticed conversion problems from any format to MP3 with either levels (distortion) or stereo-images..... so I don't think you are right on this.

It would be very interesting to know how your equipment is connected/routed. What signal goes where and how ? What actions do you take to record the fretless ? etc.

I put my setup in an easy/simple to read drawing created in Powerpoint on 1 single A4 sheet and advise all friends to do the same. This is very helpfull while making changes in wiring and makes all easy to understand.

Once the drawing is in the studio, recording and/or troubleshooting is a piece of cake.

Roel