Steve, first i was wrong. The file recorded on the audio track is the clean sound of the guitar. Maybe if one insert MIDIGuitar in a input channel the recorded sound appearing on the audio track would be what we listen.
I think you are forgetting to record or monitor enable on the MIDI track. Check that.
It goes like that. Insert MIDIGuitar on a audio track. Create a MIdi track or instrument, on the dropbox for MIDI input selection select MIDIGuitar, on the output a VSTi. It works for me.
Notice that you have to accommodate your playing to the instrument you choose. If it´s a percussive thing like a piano, or something with less attack like a sax or strings.
I think it´s fantastic compared to other gear i have, It can be underwhelming to people who is introduce by it ar first without having the hassle of fiddling with other gear, to me it´s amazing still.