You said you have a Integrated HD4200... Yet you said any thing AFTER HD4350 can do 7.1. 4200 comes before 4350...
Yes, despite from reading that the 4200 is capable of surround sound, I'm finding that it isn't.
Here is the link to the manual. Page 88 starts the section about configuring audio.
I read through that and installed the latest version of the Realtek HD Audio manager. According to the manual, I need the Dolby Home Theater GUI software to enable 5.1 and 7.1 through S/PDIF. Unfortunately the software is licensed and can only be obtained from the motherboard CD that is long gone. I did some searching and read that for windows 7 the Dolby software isn't needed and the Realtek HD Audio manager is enough.
However, I don't have the option to configure ANY speaker configuration when I'm connected to my receiver through S/PDIF and the ONLY speaker configuration option I get through HDMI is stereo.
The only time I'm able to achieve any sort of surround sound is when I have XBMC open and play a move that has surround sound. (There's options in XBMC that allow me to force a digital signal into my Onkyo receiver, and when the video starts playing I'll hear and see my receiver kick into digital surround sound mode) But it only plays at 5.1 and the rear sound channels play through the side speakers which isn't ideal. Based on this, I feel like my current hardware is capable but there's some sort of software issue.
I might be upgrading my HTPC to a P5Q-Pro mobo I've got laying around which doesn't have any embedded video solution so buying a new card and those 6450's look like they're plenty and perfect for what I want...IF they are guaranteed to spit out 7.1 surround sound.