I've asked the same question on the Ableton forum and there was one user that responded but they also could not figure out what the issue may be. Bump?

The answer is simple: The AR8’s sends 7 and 8 are not channel 7/8 but they are the main output. Get out your user’s manual and you’ll see that usb sends 7/8 come from the main output. Or check out section 2.4.1 in the software reference manual.

Hi SwitchBack, thanks for responding. I am new to this so it did not register the first time I read the manual, but now it is clear to me after I saw your message. So in essence, if I have one guitar, one microphone, one electric drum set and one electronic keyboard, I would be using Chs 1, 2, 3/4 and 5/6, and an additional instrument could be plugged into ST7/8 with no issues. However, if I decide to use the USB connection to connect it to Ableton, then the ST7/8 becomes the main output and Ableton would pick up all the instruments in ST7/8 because of this reason, right?

PS: Never mind what I wrote above, even the AR's description says "Mixer with 2 Mono Channels, 2 Stereo Channels" so that pretty much tells me that ST7/8 is not intended to be input channels like the other ones.

Thanks for reading.

Yes, you have two mono, two stereo and main out for usb recording. You could ‘cheat’ a little by only sending 7/8 to main (for recording) and use MON as your mix output. It’s only mono but will do the trick if it’s important to record 7/8 as a separate instrument