Glacial,
I don't know enough about the RS 220... but I'm thinking that you are sending a 5.1 DDL signal to your headphones, and the headphones only understand stereo input. You probably ought to connect the RS 220 to the analogue output of your sound card with the headphone surround processing enabled, or see if the card can process the virtual surround (into 2 channels for your headphones) and then pipe out the 2 channel processed signal to the headphones.
Yeah, that's the first thing I thought of too, the card probably defaults to DDL when using optical (the assumption being that you're sending it to a receiver).
Glacial, try gong into the settings and switching it to PCM output (2-channel), AFAIK the RS220 base station doesn't do an surround signal decoding so it's just gonna balk when fed one.
You may still be able to use surround processing (Dolby Headphone) regardless... I'm just not sure how it's currently working on the D2X, on earlier driver versions of my STX the software wouldn't allow you to enable DH on any output but the dedicated headphone output, later on they changed it so it even works over optical tho. I think the cards all share a common driver base so it's probably the same for you.
If you can't enable DH once you've got the optical output working I don't think it's a big deal, for all you know the card's DAC might be better than the RS220's base station so going analog wouldn't be a downgrade... Though I guess it means sending the signal thru more processing which you generally try.to avoid.
My problem now is I'm having trouble deciding if I can/should use the decoder from the AX 720's and get a sound card for my PC or should I get something like the FiiO E17 USB DAC headphone amplifier so I could use it on my consoles and PC interchangeably.
Any help is appreciated.
Like, Evshrug alluded to, it's a matter of priorities... What are you most concerned with: PC gaming, console gaming, or music? Snobbery aside, the E17 isn't any better of a DAC than a decent sound card, better amp possibly (better than most cards, not better than an STX's/Creative Zx's amp tho). You seem to be in a similar situation as Ziharay a couple of dozen posts up...
The E17 is a nice
portable DAC/amp, but it doesn't sound like that's a big concern for you... (correct me if I'm wrong) Depending on your budget, and if you care equally about PC/console gaming, I think you might be etter off getting a cheap ($50-60) sound card plus a much better desk amp ($100) for just a couple more bucks than the E17 alone. It covers all the bases and sets you up for a while (possibly for good, or a good long while), that is assuming you don't mind hanging in with the AX720 base for now.
Take a look at the E09k or Magni, they're not any harder to move between your PC and console unless they aren't in the same house (heck you can get an extra wall wart for the Magni for like $10). As for a sound card, a Xonar DGX will get you DH and paired with an external amp it'll sound as good as any complete solution south of $300.
The point is you end up with pieces that work well with each other, if you want an expensive DAC later for music playback on the PC you can get one, pair it with your amp, and switch between it and the DGX (for gaming). Or even get one with optical input and feed it the DGX's output. If you wanna upgrade the AX720 base later for a DSS or a Mixamp you can just drop it in and pair it with your amp... Not that you couldn't do that with the E17, but you'd end up paying for an inferior amp and a DAC you might not use much in the long run.
If PC gaming isn't a priority, well, I wrote a lot of nonsense you can ignore...
Altho I'd still go for something like the E09/Magni, tho maybe you would want to get a DSS or something like that before getting a DAC for the PC for music duties (E07 maybe, don't need to shoot higher if you have the E09).