I'm posting this here because this is a strange fix for my issues. This may even work on other devices, so give it a shot.
I made a post
HERE about a problem I've been having using optical out with my Sound Blaster Omni.
Yesterday, I made an interesting discovery during my testing (three posts later).
Breif recap:
Windows set at 5.1
Omni Control Panel is set to "headphones" for analog, optical set to copy the analog device in windows and NOT using Dolby Digital Live output encoding (optical is sending PCM 2.0)
With SBX processing enabled, I heard very bad results. I describe it as someone playing with a L/R fade slider, but it was applied to all audio PROCESSED--discrete channels played normally but not SBX HRTF effects.
Switching between "5.1 Surround" and "Headphone" in the Omni Control Panel had no effect with optical. Analog output was properly changing.
Sticking ANYTHING in the headphone out port, while using optical output, fixes this issue by forcing the device to process in a "headphone" mode that works. This does not need to connect to anything, I just stuck an extra 3.5mm adapter in it.
The difference is like day and night. I cannot stress enough how much of an improvement sticking something in the headphone port makes.
While I've had to do a similar trick before to mute my TV without muting SPDIF passthrough, I never even think about this because it's just so illogical so it shouldn't work. But it does.
I sugest everyone try this, or something similar, on your devices and see if it improves your results.