Sounds like you might be a tad confused, John.
The flattening seen at the waveform peaks is caused by the transformer.
But the “gouge” (for lack of a better term) that’s in the waveform (near the positive peak)
is caused by the 220µF cap you’re using. Replace it with a 10µF cap and you should
see an improvement.
The emonTx does use the same power supply to meet the DC needs of the device as well
as provide an AC waveform sample, BUT, the max current draw from that power supply is very limited.
IIRC, the absolute max is 60 mA, but the recommended max is 10 mA.
From the wiki page:
Important note regarding powering with AC: Only recommended for standard emonTx operation without auxiliary sensors (apart from a max of 4 DS18B20 temperature sensors) or equipment (e.g. relay modules) connected. Correct operation via the AC supply is critically dependant upon using the correct AC-AC adapter. If you are using the recommended adapter, the current draw exceeds 10 mA, and mains voltage is below the allowed minimum, circuit operation will be impaired adversely affecting the accuracy of the emonTx. To avoid damage to the emonTx v3 circuits the current drawn from the AC circuit should never exceed 60mA - see the technical wiki for more info. If more than 10mA of current is required, it is recommended to remove jumper 2 (JP2) and power the emonTx via the 5V USB connector. If an AC-AC adapter is connected it will be used only to provide an AC sample when JP2 is removed.*
A better solution would be to use a separate DC power supply.