Car Audio distortion detector project

My purpose with this project is to let my gain adjustments easier with just a LED-diode or something instead of using my oscilloscope's LCD display
and watch for distorted sinus signal coming from source or/and after amplifier.

Is this possible to to with Arduino?

What is the magnitude of distortion? Down to 0.1 - 0.2 % THD would be easy to measure with arduino alone, less than that would require external ADC. Is it audio amplifier?

I just found a person who allready did this tool and
can be found here: http://www.mobilesoundscience.com/f4/smd-dd1-killer-coming-soon-998/index6.html#post14482

But it seems that it misses some features.. maybe someone can help him/me to complete it.
Maybe choose another Arduino hardware also instead of that Arduino Nano that is used.