Note that in general, both reading and writing analog data is going to be more than a single instruction,
I wasn't thinking about that. Would the incoming audio have to be written into some kind of buffer and then read back out? I sort of think of audio as just acting like an analogRead on a knob that's turning very very fast 
But I guess it's probably much more complicated than that.
and "real" audio algorithms like digital filtering end up taking a very large number of cycles to implement (and perhaps lots of memory as well), but I bet you could do a pretty good job of (for example) recording arduino to a serial flash chip or card, introducing distortion, etc; the sort of things people used to do with simple electronics cleverly used to make guitar effects devices, for example. Compressing the audio using a modern scheme like mp3 is probably out of the question, though.
Yeah, I wasn't hoping to do any real dsp like filtering or mp3 compression. More like using the audio to effect control signals with primitive envelope following or things like that.