Is there a significant difference between an old X-Fi XtremeGamer Fatal1ty Pro sound card and the new Auzentech X-Meridian 2G? Would it be worth the upgrade?
Yes. The 2G is a significantly better card then the Extreme Gamer.
Also, is it true that if I SPDIF out to the Z5500 this would use the DAC of the speakers (amp) and not the sound card? If so, would it be best then to go analog out and let the X-Meridian do the work?
Yes and Yes. The soundcard has a better DAC then the Z5500's, so you'll get higher quality audio via analog.