Xbox 360 audio through PC (SPDIF)

My understanding is that the audio output from the Xbox 360 over the digital optical output is usually a Dolby Digital 5.1 bitstream, not a 2-channel PCM stream. Do you know if your system is capable of receiving and decoding Dolby Digital? Or if not, have you tried setting the Xbox to stereo output (only) to see if this makes any difference?

I'm having an identical problem only with a PS3 instead of an Xbox.

I have the optical cable connected as you do (using the same onboard sound and software) and i get nothing...HOWEVER, if you open sound recorder and hit 'record' it records the PS3!! Note, this only happens when the digital input is set as the default device (on the digital input page of the Realtek sound manager).

I've also noticed that the Digital input page of the Realtek sound manager only has 'recording volume' whereas the Mic In page has both 'recording volume' AND 'playback volume'. This is where the problem lies i think.

I reckon the Realtek Sound manager will only let you record digital audio and not playback in realtime which is what we are trying to achieve...i hope to god i'm wrong but i've been trying to figure this out for ages and can't find any answers.

I second what Slordak said. Email Realtek customer service to double check whether or not your soundcard's optical in can accept an actual Dolby Digital 5.1 bitstream. It will likely only be able to process a PCM 5.1 signal. I have had the same problem with my computer's Auzentech X-Fi Prelude and my 360 Elite in that it won't take a surround signal unless it is PCM 5.1. My only choice is probably in buying a receiver that can directly decode DD5.1. Hope that helps.

You can't do PCM 5.1 over SPDIF