I don't know if you are in the USA or outside of it but you can find Sound blaster Omni at amazon and ebay between 40-60 dollars which would be a better choice then the U3. I also seen sound blaster Z's for around 50ish on ebay if your lucky. I have had a Asus Xonar DG and a DGX both are good card's but there better options which will help you in the long run since the Z and the omni headphone amp will be able to handle more headphone's giving you more choices. Where the DG/DGX headphone amp wont do justice to say headphones like DT770/880/990 pro-250 even tho some people like the combination, Where orders like them more with something that able to handle them more. If you do decide to get a AKG K701/Q701 it should do fine with the DG and DGX it just that later down on the road you might get something else that may not pair well with the DG/DGX.
Dolby headphone does work when it set up correctly, but at times i can find it bland in alot of game's where others it work nice and both depends on what headphones you are using. it worked nice with the AKG K702 and DT880 premium 600 for me, it didn't for A900X and DT880 pro-250 and T90 and the results can be very different for different people.Also Dolby headphone has echo even the ref mode has some echo while the mode 2 has alot of it and it uses echo to do virtual surround and you might not like that. SBX surround headphone may be a better bet for you since it doesn't use any form of echo, But you won't know for sure til you try it, as you might actually like dolby headphone or you might like SBX surround headphone, But both work correctly when the windows speaker settings and games are set to 5.1 with the control panel for either cards set to headphone.
The good thing about going external dac/amp that you can use a cheap sound card optical output to send something like Dolby headphone or SBX surround headphone into the dac and have both world's and that is a very common setup that people tend to do, if they want both Great audio and the Gaming function's.But most people tend to just pick one and the other.
Thanks for the advice. It's not easy for me to decide on a virtual surround considering this is the very first time I'm getting involved in such things. From the samples in youtube videos, I found both DH and SBX quite adequate really, but I'm pretty sure the experience is different once I actually go ingame with them.
I'm aware the DG/DGX are quite low on amp, which is why I considered pairing a U3 with a FiiO E17, which are also quite relatively easy for me to get. I don't live in the US, but I can take a look around and see if I can find a way to get the omni. The omni does seem very nice, with a good enough DAC/Amp to get 558 going. It seems the drivers are relatively better for windows as well. Having said that, I'll probably go for omni and give SBX a try. I could always add an amp to it later once I get another headphone. If not satisfied, I could always give the U3 + E17 a shot and try DH-2 as they're not expensive.
Once I get the purchase done and try it out, I'll also give my impressions.