Going to break up your previous post and reply to it in parts if you don't mind...
Thanks for the reply, here is a little more info and the results of what I tested last night like you suggested.
Polk psw111 subwoofer
Polk Rm 7 speakers center, surround rear, right/left
I have the denon set to SW crossover at 120 and LFE+main
The way you have this set up might not be the most recommended way. Without knowing your other speaker settings, the usual way to get "LFE+Main" is by setting your other speakers to run full range- that is everything down to the deepest bass is being played back by your RM7 speakers, and then the bass signals are then duplicated by your subwoofer. Those Polk speakers are not equipped to handle bass frequencies basically at all, a 2.25" driver is not going to reproduce bass efficiently at all. At even higher volumes, you run the risk of blowing the Polks completely up if they're asked to reproduce high volume signals.
I would suggest just trying different settings to see how it sounds to you: in the speaker setup, set all the Polks to "small", and set the crossover somewhere around 120Hz or 150Hz. Set the subwoofer to "LFE" only. This way, any signals below 120 or 150Hz (which is all your speakers should really be reproducing anyway with that small of speaker drivers) is directed to the subwoofer, which will be much more efficient and capable at reproducing them. This will protect your speakers and may even sound a little better to you.
Also check the EXT.IN Subwoofer Level menu in your receiver. When using the EXT.IN terminals, the subwoofer level may be attenuated by your PC, which might explain the lack of bass you wrote about before.
Again, this is just a suggestion to "try and see", but I just think with how small the speakers are, they really shouldn't be trying to play those super low bass frequencies.
first test I ran the 3 analog cables from the X-Fi sound card to the EXT IN on the Denon, I then
hit the EXT IN button on the denon and checked that the 5 speakers + subwoofer worked in windows sound manager.
I then played a hard rock song and it didn't sound great. By that I mean there was no bass and it sounded like it came off a vinyl record played on a cheap record player. I plugged headphones directly into the sond card and it sounded great again.
I then removed all analog and ran Tos From the sound card to the denon, and I had the sound card run Dolby Digital Live on the ToS output (i think that means the soundcard encodes to 5.1 dolby digital and sends over ToS realtime)
The Denon then said Dolby Digital on screen and showed 5 channels. Once again it sounded great, just the right amount of bass?
Does that mean my Denon has a better DAC, or does that mean there is something screwed up in the soundcard configuration where it is sending absolutely no Bass over the analog lines to the Denon? What is weird is why did the headphones sound awesome plugged directly into the sound card?
This says to me something is off in the soundcard configuration, but a few things to try/note here:
1) Make sure there are no crossovers being set within your soundcard configuration. If you have a crossover running on the PC AND on your receiver, you might be deteriorating the signal before it even gets to your A/V receiver. Try seeing if there is a "Full Band" or "Full Range" setting for all channels in your soundcard configuration. Also see the EXT.IN subwoofer level I mentioned above.
2) If you aren't already, use only ONE volume control in this chain when listening from your computer, I would say use the Denon's. In other words, max out the Windows system volume controls and any volume controls in your media player (iTunes, Media Player, foobar, etc). Depending on the media player, using the volume control in the program can result in digital attenuation of the signal, meaning the original signal is not being sent "full strength" to the receiver. Max everything on the PC to 100% if you haven't already, and then use the volume control on the Denon. If it's TOO loud or distorts, lower the Windows system volume slider to 90% or so. The Windows volume slider, I believe, will perform non-destructive analog attenuation where program volume sliders in "mainstream" media players will digitally attenuate (i.e. drop bits) from the original signal, resulting in distortion downstream.
3) My guess is when you plug in the headphones, if there is any crossover or other soundcard configuration items that would affect the analog outputs, they might not apply/be bypassed since the whole signal is being folded into that headphone output, but can't be sure.
As far as the "better DAC", I don't think it's necessarily a night and day difference in the DAC as much as a difference in the configuration of the different hardware items in the signal path. By using the analog outputs of your soundcard, there is potential for signal alteration by the computer AND by the Denon receiver. Most receivers will, when receiving an analog input signal like you had setup, will actually run an A/D conversion, perform DSP functions (i.e. crossovers, speaker levels, EQ etc), then do ANOTHER D/A conversion. So if you have crossovers/level adjustments at the PC, those are being performed and then potentially altered AGAIN by the Denon.
When you connected to the Denon via digital, I think that effectively removes the soundcard from the equation, and you only have DSP functions being performed in one place. Again, can't be 100% sure depending on the receiver, but connecting via HDMI or S/PDIF often bypasses DSP at the source.
Also my polks have always perplexed me? should I have that crossover set at 120? or should I drop it way down to 80 even though the manufacturer of speakers says its range starts at 120? Is the volume on the SW just a personal preference or should it be set to where I barely hear bass coming out of it?
I already touched on this above, but personally I would not run the Polks full range as you have. Set them to small, with a crossover of 120 or 140. Below that "Lower 3dB limit" of 140Hz, your speaker simply can't reproduce those frequencies due to the size of the driver. By sending a full range signal to them, you may be placing undue stress on your speakers. Using a crossover actually allows the satellite speakers to reproduce sound in the areas they're designed for- that is, in the area where they are most efficient. This also places less strain on your receiver's amplifier since it is not spending much effort trying to provide enough power to reproduce that full range signal through all of your Polk satellites.
Setting the crossover results in less overall power demand by your speakers from the receiver, so you might notice better results when listening at higher SPL levels since all the power-hungry bass is now being produced by your subwoofer, which has its own dedicated amplifier. Again though, try it yourself and see.
In an ideal world, all of your speakers should be set to the EXACT same volume level when seated in your listening position. This is how movies and music are mastered, so that the sound from each speaker is reproduced at a similar volume level. If your rears are set twice as loud as your fronts, then you would probably notice a significant imbalance of volume...the ideal is to have it so you have just a "blanket" of sound where you can't necessarily pinpoint the location of any given speaker...it should sound like a cohesive whole.
The best way to set your speaker levels is to use a dedicated SPL meter, and NOT your ears. What sounds "equally loud" to your ears varies according to the frequency of the sound being reproduced. If you have a smartphone or app-capable device, get an SPL meter application and use your speakers test tones to set all of your speakers to the same volume, like 75 or 80dB, at your listening spot. An SPL meter will always be more accurate than setting something by ear- the tendency is to really crank the subwoofer level up way beyond the main speaker level, because bass frequencies due to their nature often have to be reproduced at a higher SPL level as the frequency decreases to be perceived as equal in volume to sounds of a higher frequency. If you really foresee yourself doing this a lot in the future, a dedicated SPL meter from RadioShack (45-50 bucks) will likely be more accurate than an SPL meter app on your phone as the microphone in the RadioShack meter is likely better.
Hopefully this helps you at least get started experimenting to see what sounds best to you!