Well this pretty much proves that you can't record through the headphone jack.
However, its pretty clear that theres some sort of ADC circuitry at work, so there must be at least an ADC on the Nano as we suspected. Question now is if its wired up to anything, of it theres just a 4.7k pull down resistor to group that audio is being coupled into via a ground loop. Anyone tried the line in connector on the dock?