He might get better capture accuracy with a digital oscilloscope hooked directly at the chip's audio outputs if he's lucky, but it's still pretty impressive he got a bootable image out of that.
Yeah, you want to generate a signal with no DC bias, something as simple as Manchester encoding will go a long way. If that's not good enough, there's NRZ or even a convolutional encoding. You also want to make sure you either send a sin wave, or if you can't do that, at least make sure your square wave frequency is high enough that it doesn't get eaten by the AC coupling capacitors.
The second generation of Sound Blaster was the first that could record at 44kHz (mono) sampling rate, but was still only 8-bits of resolution.
It wasn't until the 3rd generation Sound Blaster 16 that 16-bit audio could be recorded.