For those of you that have your own headsets, and want to use them with the DSS or DSS2 on the XBox 360 with voice mixing, I put together the following picture to show you how to set it up.
Someone may have already posted something similar in this thread, but I couldn't find it, I could find reference to using the following components, but I was never sure of how to set it up properly until I got the items listed below and experimented.
What you need:
1 Stereo Headset (or Headphones with a Mic Mod)
1 XBox Controller
1 DSS or DSS2
1 Optical Cable
1 FiiO E6 (E5 or other FiiO models should work)
1 Headset Buddy Xbox PC Headset Adapter (I had the wired one, but got their new puck version, which I like alot better)
Now if you love wires and hate wireless, this is the setup for you, because there are a lot of wires!

I have not had any hiss with this, and am able to adjust the chat volume seperate from the game volume.
I also have a wireless mixamp 5.8, which I also use if I want to be more "free" when gaming. (usually my son is using the mixamp, that's why I use the DSS2 setup)
You can use the picture above to see where all of the connections go.
Let me know if you have any questions.