I have a Spider III 30 Watt that's doing the same thing. Tried the factory reset, different guitars, etc, and still the same issue, the distortion cuts back. When playing on the clean channel tho it seems to turn on the distortion. Basically, it's like it changes the settings to something in between clean and crunchy............this is my first line 6.........little disappointed so far.
Is there anyone out there who can help?!?!?!?!?!