The optical port on your on-board sound is most likely "optical out" that is why it is not working. If you were to get a new sound card that can recieve optical in I would recommend:
HT Omega Striker (Slightly older chip, Front audio panel connector)
HT Omega Claro (newer chip, front audio panel connector, I have this one)
HT Omega Claro +Plus (same as above but with extra op-amp)
Turtle Beach Montego DDL (Cheapest but no front panel audio connector)
Sondigo Inferno (same chipset as HT Omega claro, but no front panel connector)
so depending on what your budget is and if you care about the front panel connector you can choose whichever suits you best. I have no experience using the Turtle Beach card, but the other 4 cards all use very similiar drivers so I can CONFIRM that I can recieve the xbox 360 digital toslink signal and play it back through my speakers.
HOWEVER, IMPORTANT!
"Taken from
http://support.turtlebeach.com/site/.../588318928.asp
"DOES YOUR SOUNDCARD DECODE DOLBY DIGITAL/DTS SURROUND?
For licensing and copyright protection purposes, soundcard manufacturers
are effectively prevented from adding DD/DTS decoders to their products.
The reasoning is that the only legal use of DD/DTS decoders is for playback
of licensed soundtracks from DVD movies. In your PC, a DVD player software
must decode your DD/DTS soundtrack, NOT the soundcard.
Many customers have asked us how to use the S/PDIF Digital Input to decode
surround sound from external players such as the Microsoft Xbox 360,
standalone DVD players or other computers. Because of the above-mentioned
licensing and copyright protections, this is not possible.
However, you can use a home theater receiver, or one of the new Home Theater
In a Box (HTIB) powered speaker systems from Logitech, Samsung and others.
Both of these product types have built in DD/DTS decoders, so will accept
an incoming data stream from the Digital Out of Turtle Beach PCI soundcard
and USB sound products.
Our Montego DDL *encodes* game audio to the new Dolby Digital Live format,
so you can hear positional audio from your PC games. It DOES NOT decode DD/DTS
soundtracks. Again, you need a DD/DTS decoder, either a software version or a
hardware decoder in your home theater receiver or Home Theater in a Box. ""
So in short, No there is no card that decodes Dolby or DTS.
HOWEVER there is a solution. Go the xbox360 system panel in sound and change the digital output to "Digital Stereo" this will output digital PCM. But you will only get 2.0 sound. You can get your sound card to upmix it to 5.1 or 7.1 through the DSP's onboard but I don't know what that will sound like. I personally only have 2.1 speakers and headphones so it doesn't matter to me.
If you get a sound card such as the ones you mentioned it should work fine. I just got the claro and I can listen to the spdif input. However one more problem though. To listen to the spdif in, you have to go to the control panel for the card and click "monitor" on the input for spdif in. When you do this, on the driver provided by the manufacturer it will not allow you to adjust the volume. This may or may not be a problem if you're using speakers that have its own volume adjust. But you can work around this problem by using the reference drivers provided by c-media and it works flawlessly.
So there is no way to recieve the 5.1 sound from your xbox into your pc and beable to decode it as far as I know. If you really want that 5.1 digital sound I recommend you either buy a reciever or the these logitech 5.1 speakers that you can hook up directly to the xbox that will decode 5.1 sound for you
http://www.logitech.com/index.cfm/sp...s/224&cl=us,en
EDIT : Oh and about the delay, as far as I know there is little to no delay, because when i'm listening to the signal i'm just monitoring the spdif-in on the soundcard, I believe the delay is less than 20ms because I tried to play the sound back in recording software with ASIO drivers setting the delay to 20ms and the sound coming out of the "monitoring" of the spdif-in from the sound card control panel was still heard first so I am pretty sure its less than 20ms. That is not much of a delay.