Comment 1 for bug 178895

At the following page, it's recommended to stop pulseaudio entirely when running audacity...
http://www.pulseaudio.org/wiki/PerfectSetup#Audacity

As far as I can tell, in Gutsy, Audacity uses PortAudio as its audio subsystem, and right now PortAudio doesn't appear to support PulseAudio as a backend. Apparently, somebody started work on such a backend (https://tango.0pointer.de/pipermail/pulseaudio-discuss/2007-November/000890.html) but it's not in active development.

Personally, I've also found that recording from audacity launched via padsp causes crashes on my system when I record audio (although not when I play audio). While I think configuration might be a factor, the fact that few people have been recommending the use of padsp and audacity makes me think that it's not a supported configuration for one reason or another.