I use the four cable method with my .50 Caliber + and my Line6 POD X3 Live.
When I first tried it out, I got an enormous amount of added hiss coming from the .50 cal's preamp. After a bit of research I found out that the FX Send on the POD is line level, not instrument level. I figure that I would need a reamp box (converts mic or line level signals to instrument level), but when I went to the store to buy one, I was advised by one of the salesmen to try a "impedance matching transformer", sort of a poor mans reamp box. It's basically an XLR female connector on one side, a 1/4" TS plug on the other, with a transformer in the middle, with a switch to reverse directions. For some reason it seems to work better in the reverse direction for this purpose: Using an XLR to 1/4" TRS converter (couldn't find an XLR to TS), I plug that into the front panel input on the .50 cal, and the other side to the FX Send of the POD. After many attempts to find some sort of difference (negative or otherwise) in the tone or level between the 4 cable method and just plugging my guitar straight into the input, I simply cannot. I even used a Waves plugin for Cubase called Q-Capture to measure the frequency response and there is absolutely no difference.
GUITAR > 1/4" cable > POD Guitar Input
POD FX Send > 1/4" end of Impedance Matching Transformer > XLR end of Impedance Matching Transformer > XLR to 1/4" TRS converter > .50 Cal Guitar Input
.50 Cal FX Send > 1/4" cable > POD FX Return
POD 1/4" Output > 1/4" cable > .50 cal FX Return
Set CONFIG in the LOOP block in the POD to PRE (before the AMP+CAB block). This puts the preamp of the .50 cal in the right position in the signal chain - after the GATE, VOL (if CONFIG is set to PRE in that block), WAH and STOMP blocks, but before everything else. The only problem is that you can't put the MOD, DLY, or VERB blocks before the LOOP block like you can with the AMP+CAB block. If your heart is that set on having one of these effects before your distortion, I'm sure you can find a close approximation of the tone your looking for in the AMP+CAB block.
Don't forget to experiment with the NO AMP model in the AMP+CAB block and try out some different cabinet models with your amp's preamp (make sure you have your 1/4" OUTPUT MODE set to COMBO PWRAMP, so that the mic models are bypassed and the cabinet models are revoiced to sound accurate coming from your amps open-back cab, otherwise if you choose a 4x12 Marshall cab, it won't sound like a 4x12 Marshall cab, it will sound like the sound of a 4x12 Marshall going through whatever mic model you've chosen, going through your open-back 1x12").
I like using the 4 cable method for two reasons:
1. I am a big fan of the versatility and tonal possibilities that technology offers to musicians.
I love being able to instantly switch amps sounds with the click of one button (and although I know that it's debatable just how accurate amp models are, I feel from the audiences perspective, even 80% accurate is good enough for most people). I love the fact that I can use my X3L as a vocal processor as well. I love the routing capabilities (it's nice to be able to route acoustic guitar or synth sounds directly to the PA instead of through my guitar amp). I love all the neat effects at my disposal. I love being able to really taylor a sound for each song - especially useful in a top-40 cover band situation.
2. I am a big fan of the simplicity of just plugging a guitar into an amp.
Lately I've been playing bass in a country/rock/blues band, and the guitar player has been using the same amp (rivera-designed 1983 Fender Concert) for over 20 years, with absolutely no effects (he doesn't even use the footswitch to select channels). I am amazed at what he can do with just the amp and the volume and tone controls on his tele. For quite a while I was ditching the POD in favor of "getting to know" my guitar and amp. It was rather refreshing to be able to concentrate on my playing and singing instead of worrying so much about how close my tone is to the original recording or how perfect the tone is for a song. I've just got back into using the POD again, and I find myself using the .50 cal preamp in most of my patches, and as a result I end up with far less patches than I would normally have. Also, using the 4 cable method has, strangely enough, allowed me to be LESS dependant on using the POD - if, for whatever reason (laziness usually), I decide not to bring the POD to a gig, I know that I'm going to get the same tone that I've been using on almost all of my patches anyway.
I highly recommend the 4 cable method to anybody that is curious about the possibilities that modern musical technology offers, but is afraid of the effect that it will have on the "real tube amp tone" you are used to, and who doesn't want the technology to take over. Yes, there is a little more setup involved, but as long as you take the time to figure out how things need to be connected, and how the levels should be set, you should be able to get the exact same tone you've always had, plus have all the other tonal possibilites that the technology offers.