This video tutorial outlines the use of the clip fix effect which was introduced into Audacity in version 1.3 and which allows correction of minor distortion.
We also explore the idea of creating distortion and look at a very simple technique for this using Audacity's noise generator and GVerb. This video uses Audacity v1.3
There are two cool distortion VST plugins which you might want to try out. Both are available for download and include instructions. Tubebaby is found at Tubebaby VST plugin's homepage.
Check out also Voxengo Tube Amp which is found at Voxengo's website.
The GVerb settings used in the tutorial are as follows: