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Clipping doesn't exactly have to work this way. You can have an output that's running perfectly linear, and not clipping, but is just too hot for a sink. That sink will then clip it's output, because you're demanding more than it can offer. The Prelude is notorious for doing this to devices - 5V is way too much.
As far as the "Bits thing" -
24-bit audio is a myth. It cannot exist. And hardware has been able to do 16-bit audio since at least the early 1990s with no problem. Therefore you aren't losing any resolution by lowering the output volume slightly (The SNR will drop a few points but it's irrelevant, is my point).
Dynamic range is something else, and with modern media there isn't a whole lot of dynamic range to begin with. Again, this hasn't really been a problem since before the time of VHS Hi-Fi. You aren't sacrificing anything here, at least in terms of "can this be measured and heard" - you can "feel" that it's worse, but the bottom line is a heavily clipped signal sounds worse than ANY audiophile-qualified "unpure" signal; it also risks damage to the headphones.
The destruction of drivers through clipping is a serious problem, I would entirely caution you to turn the Prelude down. Whatever gains you may believe to exist by running everything at 100% ("for maximum fidelity"), you will negate by listening to a clipped signal and risking damage to the drivers. If, when you turn the signal down, there's no more bad sounds, it's probably alright. If the cans sound "wrong" in a big way, it's possible you damaged them. I don't know of any speaker/headphone maker that will cover damage from over-driving in their warranty, except perhaps Koss.
Despite you believe or not if it exists, it is a reality, even if it doesn't reach perfect 24bits resolution. But let's leave the myth discussion out of here or it will lead to more arguing than it is allowed here.
Like obobskivich said, having continued listening when there is clipping can eventually damage the drivers, which is why fixing clipping the moment it happens is a sensible choice.
The Prelude is a great card for gaming, levels just have to be in check in order to avoid clipping, therefore avoiding potential hardware damage.
The 50% base volume is something that predates modern OSes, namely having started with Windows 2000 and XP, has they handled attenuation in a different way than what Vista and 7 do. So, considering Vista or 7 is being used, and that clipping occurs at 100%, then volume shouldn't drop below 80%, or be as close to it (in this case, to 100%) as possible. The end result will be of higher quality this way.
And I certainly agree that Youtube is an awful place to do proper audio tests. Using local files of high quality (less compressed and of high resolution if possible) is a much better option.
About soundcards for gaming, the Xonar DG and DS are toys (even the Essence STX is a toy, mind you), due to the lack of the full gaming feature set (from hardware OpenAL to in-game EAX, as well as DirectSound3D and the proprietary algorithms of the DSP chip, which are audio renderer agnostic). You want to go with a soundcard that has a X-Fi DSP chip, which includes all Creative X-Fi cards (except XtremeAudio as it lacks the DSP chip, making it a fake X-Fi), and a few 3rd party cards. But overall, the currently best soundcard you can get for gaming is the Creative X-Fi Titanium HD.
In all honesty, if you don't have a free PCIe slot, you should just keep your Prelude, as it is a very capable soundcard in terms of gaming, and at least on the same level as adequate PCI replacements. When you have the possibility to get a PCIe card, just get the Creative X-Fi Titanium HD and give it no further though.