I have been recording vinyl to MD a lot lately using a Technics SP10 turntable, SME III arm, Shure V15-V cartridge, and PS Audio IV preamp. I don't even try to get auto- track-marking to work, I do a manual fade-out at the end of each track using the analog level control on the PS Audio preamp, then I go back and edit out the pre-track noise at the beginning. I found that it is best to leave the JE520's digital record level control at "0" and set the level using the analog level control on the preamp. This way I get maximum resolution from the ADC. If this were not possible, it would be best to use positive digital record gain adjustment, but never negative.
I have done some experimentation regarding the analog input levels on the JE520. I have come to the conclusion that the "over" indicators do not accurately report ADC clipping if the input gain is set to less than 0.0. In fact, in most cases, no amount of input signal will light the "over" indicators at negative gain settings, however, severe clipping may result in the ADC. Positive input gain settings result in some loss of ADC resolution; +12.0 dB (the maximum allowed) causes a loss of 2 bits. Therefore, optimum results are obtained by setting the input gain to 0.0 and controlling the level externally.
That said, there should be little reason to use a negative gain setting under normal circumstances, since the gain between the analog inputs and the ADC is fixed requiring a *very* hot input to overload the ADC. Therefore, the most common situations will require a positive gain adjustment causing slight loss-of-resolution (almost inaudible).
I've found that using a Nitty Gritty record cleaning system is the best way to reduce the surface noise. You can get all of the Nitty Gritty stuff and the supplies on-line from www.nviclassical.com I mix my own cleaning fluid from distilled water (80% by volume), isopropyl alcohol (20%) and touch of dishwasher anti-spotting fluid (a wetting agent that keeps the cleaning solution from beading up when applied to the record).
Many records are cut with hum or cutter rumble that is far worse that the rumble of my playback system. However, some amount of experimentation was required to reduce mechanical coupling to further reduce noise in the playback system.
My point is this: Achieving good results transfering vinyl to MD is not a simple task. But it can be done by those willing to invest the effort.
These techniques have grown out of my broadcast radio experience several years ago (in the pre-CD era). I worked for a classical music station at the time. They used the Nitty Gritty cleaner, the Shure V15-V cartridges and SP10 turntables. The engineer custom built preamps based on the PS Audio design. The biggest difference was that they used Signet tonearms instead of the SME. They also mixed their own cleaning fluid; they used "photo-flow" instead of dishwasher anti-spot fluid.