So over xmas I got myself a cheap 2 input mixer and a cheapish sehnheiser mic.
Well the increase in sound quality when I recorded was huge, however, I'm still getting big problems recording distortion. With the mic I just get far too much buzz and fuzz [wherever it is positioned] and it often sounds quite tinny.
As a result I tried using a direct input from my effects pedal line out to the input of the mixer, which does sound better, but it just doesn't sound right, there's too much feedback added on even with trim at the highest setting and my gain all the way down and its often difficult to get a decent tone.
Anyway my question is, after that hugely entertaining block of information, how do you get your distorted guitars to sound decent when recording? [Spending as little money as possible of course.]
Assuming that your soundcard is configured correctly, you might have to try messing around with the EQ and the gain on your amp to find settings that record well with that mic and mixer, bearing in mind that amp settings that sound good in the room won't necessarily sound good when you record them. It sounds like you either need to bring the drive or the gain down and also bring the mids up a bit, you could even try messing around with the EQ on your mixer.
Here's a blog I wrote recently:

My Current Approach To Rock and Metal Guitars

It's certainly not "budget" but there are some great concepts in there.

I could get damn good guitar tones with any cheap Sennheiser mic (that wasn't broken). The secret is in the amp. This is one area I couldn't skimp on. There are great amps at good prices. I paid $400 for my 5150. (Which is less than most Line6 products). I don't think I could get great guitar tones with a crappy amp, but there are some good sounding $400 amps out there (they just usually aren't digital modeling amps).

I do not EQ my guitars going in. If I have to EQ my guitars something is wrong with the tone on the amp. In mixing I may boost or cut a few db hear or there, but on the day of tracking, the rule is no EQ.