Ok, I double checked and I do have S/PDIF set as the default in the bios (instead of HDMI). Thanks for the advice stickg1, but my problem is that I cannot even select it to be the default device. I have my headset plugged in, tried both the front and rear panel, and yet it still states "Not Plugged In." Yesterday I tried a set of speakers instead of my headset and they didn't register either. My headset does work, I'm currently using it with my Tablet.
Here is something interesting: http://i.imgur.com/7PiDS.png
Shouldn't Realtek High Definition Audio be the only one there, or is the other one supposed to be there?