I don't see why you couldn't pass X-Fi MB2 processing over S/PDIF, though I haven't tried it myself (little experience with X-Fi MB on other people's systems, no experience with X-Fi MB2). If it relies on the Creative control panel, you could set it to "Play Stereo Mix using Digital Output", which is exactly what it sounds like. (Whether you'd have the latency or not, I have no idea.)
There isn't a noticeable hit to sound quality using the SniperCzar trick for USB DACs, is there? That's the one thing I'm wondering about, but without a proper USB 2.0 audio device or the desire to spend so much money on one...
Meanwhile, the notion of combined DAC/amps does unnerve me a little, but only because I think it's a better idea to have a separate DAC and headphone amp. Match the amp to the headphones than the other way around, if you will. As to what gear I'd suggest instead, I frankly have no idea since that stuff's on the expensive side of things and I can't afford to purchase it all just for reviewing's sake. I like my Titanium HD, but I'm in no place to say whether it's that much better or worse than getting an external DAC. (On the other hand, I'm far more trusting of the actual X-Fi DSP for gaming effects than the CPU-based code in the X-Fi MB software suites.)