Right-o, I recently bought a LTB 5.1 surround sound headset, and a Sound Blaster Xfi Fatality FPS.
However with the headset I have been getting alot of distortion from it. I dont know what is causing it, also the rear speakers: left, right, and centre; are also way quieter than the front channels. While the front right and front left channels have some distortion to them.
At the audio selection make sure to set it to gaming and heaphone for the speakers. I think your setting right now is with a speaker not headphone. Adjust the equilizers, bass, eax, crystalizer,3d, etc and finely tuned it for headphone use and save that setting. I highly doubt your audio settings is optimized for headphone use.
Did you try the headphone with other computer and cd playing to see if it's not the one causing the problem?
Yes, I have the SB xf-i extreme music and I can close my eyes and tell where is the sound coming from during BF2. Im using a Bose headphone not a 5.1 sorround sound heaphone. With your card it should be a lot better.
Try adjusting the audio setting at 5.1 speaker to see if that works. If not then switch back to headphone and fine tune the settings.