Hey, Steve. Having been through a few of these MPX-65 MPX units, it sounds like the tuner and/or the MPX decoder itself may be out of alignment. The tuner IF, particularly the limiters and detector, need to be in good alignment to have good stereo operation, including noise and separation. You might try this first to see if stereo reception improves--if the tuner is out of alignment now, there's a good chance an alignment will improve things.
It's not unusual for the volume level to be slightly different between FM mono and FM stereo and for there to be a very slight amount of noise (hiss) in stereo mode (from the decoder operation), but neither should be pronounced. Certainly you should hear no perceivable distortion.
If aligning the tuner doesn't solve it, the MPX-65 itself may need to be aligned and this requires an FM stereo multiplex generator (like the Fisher 300, or the Sencore SG-80 for example) to complete. The instructions for both alignments are in the Fisher 400 service manual.
Dave Gillespie (of course!) is the expert on these matters. This link (and some of the work in other AK threads by Dave) may help:
Hi everyone. Recently picked up a 400, had the basic power supply work done. Sounds great on aux and phono and fm mono. But on fm stereo, the right channel volume is about 1/2 of the left. I’ve tried swapping around the 12ax7 tubes but no difference. Any ideas? Thanks in advance. Brent
audiokarma.org
Dave