Audio delay on Dacmagic

I had the same problem, though not with a DACMagic specifically. Turned out it was the television: 52" Philips.

Make sure you're not loading a multi-channel signal into the DAC.  Most DACs can only process stereo signals and not surround signals.

The problem is with the TV, not the DAC.

As for settings, I don't know the specifics, but try to turn off any extra processing. There might be a "game" mode that turns off the extra processing (which is probably what is causing the delay).

Most TVs have a "lip sync" feature.  This changes the audio to match the picture.  See if your tv has that.

Perhaps you can try to do the same I do; instead of connecting all these sources directly to the DAC I connected my tv (a Panasonic plasma) to my DAC. Of course, you need a tv with a digital-out but otherwise it is convenient; no more source switching, and, again in my set, no audible loss.

The problem is that your TV is causing a delay, which you need to fix. For movies, delay isn't a big deal as long as it's in sync with the audio. With games, any delay will interfere with playing, so it's important to figure out what's causing it, and fix it. Even if running the optical signal through the TV causes it to be in sync, delaying your audio by the same rate as the video will still leave your controls laggy and unresponsive.

Some rare games, like Guitar Hero, have options to manually compensate for audio/video delay, but action games, where immediate feedback is important, don't and can't.

Like I said before, look for the "lip sync" function in your tv (if it has one).  You can change the timing of the audio to better match the picture.  Even my cheapo Vizio has it, so I'm guessing more spendy tvs have it, too.