When you connect via digital, the soundcards hardware does NOTHING. You go through the soundcards driver layer, the audio gets sent out as digital, and some other device will handle the conversion to analog.
If you are going to connect to a receiver, the best option is to send the audio from the GPU via HDMI, so you can avoid all those nasty SPDIF format/quality limitations.
Ok, so the HDMI option is all automated then? I simply go to nvidia control panel, setup multiple displays (like I have been doing) then just play the movie and the audio signal will travel through the HDMI cable to my AVR to break it down??
I guess I was also under the assumption I had to use the toslink optical port from the back of the mobo.