The actual sound quality is just fine. I use an HDMI card for 5.1/7.1 output to an AVR, and am quite content with the results. Game developers often heavily compress their audio samples regardless of the platform they develop for. But, with so many sounds being combined at any given time and our engagement with the games, fidelity of these samples is not of paramount importance.
As for selection, you certainly have your options. Tony touched up on these, but I'll reiterate a bit.
For multichannel analog, anything from an onboard solution to a high-end sound card will work fine. Of course, there are varying degrees of quality that depend on the actual sound solution's analog section and post-processing abilities for things like bass management.
For SPDIF multichannel output to an AVR, you want a sound card that has Dolby Digital Live and/or DTS Interactive support.
For uncompressed multichannel PCM output over HDMI (like the PS3 can do), you currently need either an ATI 5000 series graphics card (or one of the 4000 series cards), an Auzentech X-Fi HomeTheater HD, or an ASUS Xonar.
The Creative-based solutions (from Auzentech or Creative) are very good options if you play a lot of old games that use DirectSound3D, and if you have a liking for genuine EAX audio effects with these games. For newer games, branding is not really a concern.