Oh well. It looks like I've got more problems than a perplexing cap.
My multi-meter shows 35 mV DC & ~0 AC between USB ground and soundcard line-in ground with both cables un-attached (plugged into the PC of course). When I plug in the USB cable to the Nano and leave the audio cable unplugged it shows 75 mV DC and 15 mV AC. In both cases the audio ground is lower than USB ground.
15 mV AC (approx rms) works out to about +/- 4 LSBs p-p which is what I often see. So hmmmm.
I'll have to chase down these problems first then see what the cap does.
Thanks
Doug