I just tested out the DSS with the 3.5 mm to 3.5 mm cable in Pro Logic II and Dolby Bypass. It gives me a really weird sound in Pro Logic II, and didn't notice any changes in Dolby Bypass. So what light should be turned on on the DSS for true Dolby Headphone surround sound?
It should be the third light from the bottom, the one that says DD next to it. If it is not coming on during gaming, your output may not support Dolby Digital Live. What sound card / motherboard audio are you using?