The audio preview is used to check the audio levels prior to monitoring. I have had occasions where the audio was set too high on my system and distorted the sound so I like to make sure it's right. With 3.66 I have to make a test recording and then play it back to make sure it's right. I have reverted back to 3.5. Is the feedback loop you speak about preventable through local settings? If so perhaps some instructions on how to prevent the feedback might be better than removing a feature.
Just a though.
Thanks,
Mike