I'll try, but I'm certainly no expert.
First, Gwyneth is right. With digital gear, 0db is maximum volume. You don't want to go over that and you want to leave some headroom.
Second, I think "What You Hear" refers a stereo mix of input and output so that you can re-record something like a broadcast or the audio from a program that is running. Assuming I have that right, that's actually not what you want to record from, because any sound effect that your computer plays will get mixed in with your guitar signal.
Can you select an input called "line in"? What about "analog in"? What about "microphone" or "mic in"?
You might have a line in and a mic in, in that case the difference between the two is that the mic in has some gain on it. Which, if you're already clipping, you don't want.
Also, there may be two mixers, the Windows one and maybe a separate SoundBlaster one. I know my M-Audio card has its own (software) mixer. If the SB has its own mixer, try turning the input level way down in there. Also try recording your guitar with your volume pedal at 1/4 at most and see if it still clips.
Other ideas: if you have an amplifier with a line out/tape out, or even a headphone output, try that.
To be honest, I gave up on trying to get a guitar recorded into my sound card's line in because of issues like these. I bought an M-Audio Fast Track USB, which is a guitar interface that goes for $100 or so. Line6 has a similar one. The quality is pretty good, nothing studio-quality but definitely clear and good enough for YouTube. My playing is not YouTube quality, however.
I have also used it to drive a keyboard amp when I needed MIDI sounds for a musical I was involved in.
Good luck, hopefully there's some better expertise in the recording forum