I have it connected right. But i found out that the onboard audio can't decode dolby/dts audio from my ps3. So i just bought the Logitech z-5500 which do it all.
Correct; hence the problem with the SPDIF standard. The only surround formats that can be carried are Dolby/DTS audio, which need to be decoded, otherwise you get static as the output. Annyoing, since the only way for a PC to decode said audio formats is through some other program (Windows Media Player. Cyberlink PowerDVD, etc).