OK, so last night I trie the Extigy solution since I could get it at the local CompUSA. It didn't quite work like I was hoping.
I wanted to use the Extigy to do DD decoding of the DSS as well as DD decoding of DVDs.
So, I connected the optical digital out from the DSS to the optical digital in on the Extigy. First off, there does not seem to be a way to switch between inputs on the Extigy. If its plugged in, and the input source is on, then its coming through the speakers. I can mute the source in the Windows volume control but thats a pain. So this means that the DSS audio is playing all the time even if the TV application isn't running, unless I turn the DSS off every time I stop watching TV. Not an elegant soultion.
For DVD, interestingly, there is no need to make any connections from the video card to the sound card. All you have to do is set the DVD program to pass through the audio (via SPDIF in software) and somehow the Extigy picks it up, even though I didn't actually connect the SPDIF in to anything. I am guessing it is using the USB connection as input, but I still can't figure out where the output signal is coming from since the digital out on the video card is not connected...
In any case, the performance doesn't seem to be very good. I get a bunch of high pitched squealing at certain parts of the Fifth Element.
I assume this is due to limitaitons in the USB bandwidth, but who knows.
So now I am thinking about the Klipsch DD5.1 solution. I am a little confused as to how I would hook it up correctly. I know it has optical and RCA SPDIF input and well as 3 sets of stereo inputs. I could hook the DSS optcal digital out into the DD5.1 optical in and the video card RCA digital out into the DD5.1 RCA digital in. But what about the sound card? Do I just use one of the stereo input sets? If so, do I even need a 5.1 sound card like the GTXP at all?
I only use this rig for TV / DVD and light internet surfing, so I guess it wouldn't be that big of deal not to have a 5.1 sound card in it...
The other option is to get WinDVD and a good 5.1 sound card. This would elimate the ability to do DD decoding from the DSS, but oh well.