you cannot select a mic and a guitar input at the same time.

mic stereo means it's using both mic inputs.

then when you select instrument it's using the instrument input only and not the mic.

what's happening to you is not a fault, it's how it's meant to be.

there is a few things you could do to make it how you want it.  you could use DI boxes and connect guitar and mic to the line inputs and use line stereo, etc.  that's what I'd do.

Cheers

Rowbi

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Line6Andy