Your amp has a brain called the DSP and an amp section.  If you take it apart you should be able to tell them apart.  The brain section will have all the control cables from the knobs going to it.  This brain section is what determines what the tone sounds like, the other section just amplifies the sound.  If this brain section is bad it can do just like you are saying.  You can have sound because the amp section is working, but the knob don't seem to work correctly.  This may very well be the problem. lol  There are ways to test out the DSP but I figure that is beyond the scope of this little forum page.  And as for schematics - by everything I've heard so far you can forget about finding them.  Only authorized service centers get schematics for Line6 products.

If this brain section *DSP* is bad the shop would more than likely just replace the entire board.  That's probably the 120.00.  The 60.00 up front money is just to look at it first.  The total bill could be even more, who knows.

Many here has said the DSP section began life as a stomp box and was the original POD V2.  I'm not sure if that is correct but if you look at many Line6 stomps they do seem to have the same controls as the amps so that may be a true statement after all.  The sad thing is that if the DSP does go out you are not left with much since most every control on the amp is wired directly to it.  You might be able to mod the DSP and replace it with a newer stomp, but with the price of a new POD that might be an expensive experiment. lol  I figure you could get it working, but it would be a bunch of wire sorting.  Once you see all the wide ribbon cables in there you will understand that statement.

Have you taken the amp apart and checked for loose ribbon cable plugs, wires, etc?  Once you get it apart you will see what I'm talking about.

And if your relative is an EE then she can easily trace the board herself by looking at it.  I've done my SV myself and I'm a complete idiot, so it isn't all that hard. lol

My reasoning for suspecting the DSP is because it is what makes the distortion and clean tones on the amp, the amplifier section just drives the speaker.  If all you have is a distorted tone then more than likely the DSP is fried.  Check out this thread.  Something like this has happened before.

http://line6.com/supportold/thread.jspa?messageID=351614

Best of luck.