Hi all,
I'd check the Arduino forums for using an Arduino to digitize audio, I think some people have documented how to do it.
And look for arduino-based guitar pedal effects.
However, there's nothing the arduino/avr can do that the average intel CPU can't. Since you began with "I am trying not to add too much to the hardware configuration of my system", just use pd to downsample the audio and drop that sissy 8-bit mcu ;).