Sound Issue (possibly driver)

What brand/model is your speaker system? I had same issue with an older Creative Soundworks?system but my newer Logitech works great.

Creative A500, but it's obviously not the speaker problem... as they work fine during the configuration test

My Creatives did the exact same thing, they worked during the test, all speakers front and rear, but I could never get anything out of the rear during games or music. They worked in XP, IIRC, though it's foggy now. I never got to the bottom of it. These speakers I had dated back to mid nineties and didn't do 5.1 - just 4 satellites and a sub. As soon as I hooked up the new Logitechs everything worked great. I could have been doing something wrong I guess. I only mention this because like yours mine worked during the sound card test utility but not elsewhere.

strange thing huh... also, they worked fine when I was using XP

Microsoft changed how sound works in Vista, and many makers (Creative being the biggest offender/example) havne't bothered to write proper drivers for their stuff. Arguably because they want you to buy new cards, but it could simply be incompetence...

You can try:
Realtec: http://drivers.softpedia.com/get/SOUND-CARD/OTHER-SOUND...