For what it's worth! I had the same problem and was about to throw the magicjack in the trash. As a last resort I upgraded my DSL speed from Ultru to Extreme (3.0) and the problem seems to be solved. Good audio on both ends now. Of course it cost me $20.00 a month so the phone is no longer free.
I have the same choppy incoming audio quality but the outgoing is fine. I have spent a lot of time with the chat persons and no help from them. Tried all the "fixes" and computer tweeking. Now I'm going to buy a powered usb hub. After that the Magicjack goes in the TRASH.