Originally Posted by neonplanet40
I also have it connected via a Digital lead as well.
Sorry I missed this bit...
I would suggest you install AC3 Filter with mpc and tell it to pass through all sound to SPDIF. Or you can tell VLC to pass out audio through SPDIF in settings>preferences>audio>Use S/PDIF when available - make sure that is checked.
I think the problem you are having is that your sound decoder is converting it to stereo before sending it out the sound card... have you tried the optical output on your onboard sound card? there should be no difference in quality, but it might work more easily