You're right Fatparrot, a guitarist can use the distortion from a tube amp to create various sound effects, but that is in a totally different environment and setup than a home system. In fact, some guitar amps will include this "sound" to be added to the playback, depends which head you buy.
But in a home system setup, this sound would be very undesirable for playback. Fuzzy, static, breaks up, distorted, whatever you would like to call it. When a tube amp hits maximum output, the sound becomes undesirable for CD or LP playback.
In what firstname.lastname@example.org indicates, "When i turn up the amp past about 1 o'clock the sound just breaks up/distorts", his description indicates that his system is hitting maximum output.
The simple math: 87 dB speakers, 12 watts of power, your not going to get a lot of overall output in dB, maybe 90-93 dB, and then it will break up. It probably sounds good between 9-12 o'clock volume settings. And (keeping in mind that most systems vary) most systems will peak somewhere between that 1-to-3 o'clock setting on the volume knob (again, as described).
Now, I guess some of the troubleshooting questions I might ask is:
How old are the tubes? How many hours of run time are on them? Also, is the amp auto-biasing or does this need to be perfomed manually (I am not familiar with the setup and operation of a sugden). I might suspect that an older amp that has not been biased in sometime would require this, as well as old tubes. And especially if both are true, this would effect the sound quality, especially at higher outputs.
I might look into the amp and tube setup to ensure peak performance. Then I would check to make sure each tube is in good, operational state.
Thanks again, Todd