What you're talking about is the difference between a technically correct visual and a psycho-acoustically correct visual. I do have plans to modify the visuals to be more psycho-acoustically correct than technically correct.

The effect you are seeing with the AUX in is the automatic gain control. When the signal becomes weaker, the gain is boosted. The line goes right to the top because it is using maximum gain and normalisation (There is some noise). This problem has been fixed for future releases - When the signal is below a certain threshold the gain and normalisation are reduced to zero.