Steelman - Thanks very much for the reply. I was under the impression that the tv could pass through DD or DTS. For my basic cable box, I've always had it going into the TV, then optical to the receiver. My receiver is always set to one of the dolby prologic for the TV/cable box input. Looking further into that, it appears that actually takes stereo sound and creates a faux-5.1, correct? I used to have a PS3 hooked up there (moved for now to try the htpc) which had optical going directly from the PS3 to the receiver, and in turn audio was always great.
It is good to know that with my current setup I will not be able to get the sound I'm looking for. I was going to try to make this hardware work, but also looked to completely build a new htpc that would have an audio out. Looks like the latter will be the best option. My current setup does not have a optical out from the graphics card or motherboard. My receiver unfortunately does not have HDMI input, only 2 optical inputs.
Edit: I guess the other option would be adding a sound card with an optical out. Also, apparently my motherboard does have a Coaxial / Optical S/PDIF out port. I looked and didn't see it. I was looking for a toslink though, didn't realize this second style existed.