Have you tried to set the LINE/AMP switch (on the backside) to line? The sound becomes very different in AMP mode because it adapts for use with a regular guitar amp, and LINE is for direct recording/headphone use.
But I really think that you have got a dodgy unit, I have never had any problems with my TL and it sounds nothing like what you describe.
Try the LINE/AMP switch first and let me know how it goes.
I can't say that I've given up on a flanger cause I've never liked the effect either. I also can't say the same about Tremolo. I hate them both equally. - Tone2TheBone 2009