The reason I suggested trying "arecord | aplay" is because it would be running input and output simultaneously. In Audacity, you're doing one after the other.
Unfortunately, I'm not sure exactly what is going wrong here. Does your soundcard work as expected on other computers? Was it fine on the BeagleBone Black?
On the Raspberry Pi, I'm running a multi-effects pedal, all built in Pd. There's two parallel chains of processes, (each can run up to eight effects). The effects I'm using are a looper, delay, waveshaper distortion, flanger, granular synthesis (sort of limited implementation), reverb, and EQ. I'm controlling things with a QuNeo MIDI controller and a push button attached to the GPIO pins on the Pi.
By default, each of the eight effects in each chain are set to "bypass," which simply passes the signal onto the next effect. However, you can adjust this on the fly for the effects to be whatever you want, so I can set up something like:
Chain A: looper -> distortion -> flanger -> delay -> granular -> reverb -> EQ -> bypass -> output
Chain B: delay -> bypass -> bypass -> bypass -> bypass -> bypass -> bypass -> bypass -> output
I can independently control volume of each chain, so I could use Chain A to build up some sort of droning ambience, and then solo over it using Chain B.
In practice, there is definitely a limit to the ability of the Raspberry Pi. I think the example I just mentioned would probably run, but if I try throwing too many effects on at once, (flanger, reverb, distortion, and granular are all pretty intensive), I will start getting glitches - huge crackles and jitters in audio. Turning off a few effects will stop the glitches, but I all I can do to prevent them is to be conservative about how many effects I turn on.
Just uploaded a little demo to Soundcloud of a recording I made with a somewhat similar FX setup to what I mentioned. It was recorded with my cell-phone, so it's a bit awful sound quality-wise (also really really quiet, whoops...).
If you're curious about the patches and stuff, it's all here, but it's hard-coded to MIDI values on the QuNeo and might be a bit confusing: