Wouldn't that require the S/PDIF output device to have Dolby Digital Live so everything's encoded on-the-fly to begin with? A lot of games apparently keep their channels in PCM and can't encode into Dolby Digital in real-time. S/PDIF only has enough bandwidth for stereo PCM. If Dolby Headphone only gets stereo, I just don't see it working as intended.
On the other hand, the Mixamp does have a mini-USB port on the back. Maybe it doubles as a USB audio device for PCs?
Need a little guidance, for best sound card under $100. Never bought a sound card before.
Found this for $40, the asus xonar u3: http://www.asus.com/Multimedia/Audio_Cards/Xonar_U3/#specifications
Is there something else better I should get, that is under $100? Will use for 80% gaming, 10% movies, 10% music.
First off: Does it need to be USB, or can you get an internal sound card?
Second off: Which games do you play? If you still like older titles, you'll probably want EAX 3-5 support. With newer titles, it's more of a matter of what binaural surround HRTF tech suits you better.