I know nothing about MusicMatch, so these are just wild shots in the dark...
1) Is it a shareware-demo version of MusicMatch that only allows low-bitrate recording? Perhaps you need to upgrade the software to a retail version before it'll do high quality?
2) Perhaps it uses the Windows built-in CODECs to do the encoding, and you've only got an older version of the WMA codec installed? Check the online help for MusicMatch and see if there's anything about Windows CODECs in there.
3) Are you selecting an option somewhere which says "do my ripping as fast as possible" or "do my ripping in real time" or "encode the files as they're being ripped"? It's possible that such options would throttle the quality level of the encoder so that it can get the job done. If that's the case, then tell the program to rip the wavs to the hard disk first then encode them later at higher quality.
Like I said, these are stabs in the dark and might not be related to your problem.
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Tony Fabris