digital versus analog usefulness comparison

I notice in mp3 playback, Optical is very clean, whereas Analog has a few chips and fuzzy clicks to the music.

HOWEVER, when i turn on CMSS 3D with the analogs all of the sound artifacts go away. Seems pretty nice, does CMSS double has a filter of sorts? I wonder what people feel of CMSS 3D + analogs vs non-CMSS 3D with digital optical in mp3 playback, cd playback, dvd audio, and pc gaming.

Digital is always better than analog because less distortion and signal loss. The following are what I understand -
MP3 PLAYBACK: The music quality has been compressed down to 96-128k bitrate, so basically analog output would cause more signal loss but not signficantly. So there shouldn't be much different, at least not something that human ear can differentiate.

CD PLAYBACK: Digital is bettter because CD audio is digital signal (Pro Logic 2 is analog I believe). The best way is use digital audio cable to connect your CD-ROM/DVD-ROM to SPDIF input on your mobo/sound card then connect the spaeker using digital output. By this way you will not suffer from no quality loss. I'll give an illustration:
Analog way: Digital source (CD) -> analog CD_in (mobo/soundcard header)***quality loss*** -> analog output***more quality loss***
Digital way: Digital source (CD) -> SPDIF_in (mobo/soundcard header)***no quality loss*** -> digital output***no quality loss***

DVD-AUDIO: I think you mean DVD movie. Digital is still better. DVD movies sound stream are digitally encoded to AC3, therefore you'll get true realtime Dolby Digital 5.1/6.1/7.1ch sound encoding. For Dolby Surround Pro Logic (analog), the digital sound has to be decoded and then converted to analog output ***quality loss***. I'm not expert on this but I believe true digital sound (384k) is batter then DAC sound (192k) and in case of Audigy2 is even worse (96k).

PC-GAMING: OK, for this analog may be better unless the soundcard itself can do realtime decoding. Let me put in this way, the positioning sound from most games is sort of like "pre-coded" so you'll get 3D effect. But if your soundcard can do realtime digital decoding (like SoundStorm from nVidia) then you will still get 3D effect from digital output. In fact I connect my Creative Cambridge Soundworks DTT3500 via digital coaxial output from my on-board SoundStorm and I get positioning effect when playing games like Max Payne, NFS: Hot Pursuit 2, Warcraft 3 etc.

Finally, I'm sure Z-680 has an external receiver/decoder and this receiver/decoder is capable to do realtime decoding even if your soundcard can't.
All of above is based on my own knowledge, it may be incorrect but one thing I'm sure is that digital is NOT only stereo and as a matter of fact true digital can do stereo/2.1/4.1/5.1/6.1/7.1 channel audio processing.

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No, you're wrong. Digital output and analog output on Audigy2 are both up to 6.1 channels. However, there are some considerations:

1. Read my reply to your other post but basically, the analog output quality of the Audigy2 is one of the best in class. For digital vs analog, it all comes down to which of your devices (the sound card or the digital receiver, digital speaker, etc.) is converting the digital signal to analog and which of them does a better job with this. I don't know about the quality of DAC and any digital filters on Z680s but I do know that Audigy2 sports a rather fine high-end convertor.

2. Because of DRM, you can't play back DRM protected materials (like DVD-Audio or copy protected WMA files) via digital output. You're stuck to analog with these sources.

3. Digital 5.1 or 6.1 works IF your source is already in that format e.g. a DVD movie with discrete 5.1 or 6.1 channels. It doesn't work with games because games don't have DD 5.1 or DD EX encoded soundtracks, effects, etc. The only audio solution currently that does this (by doing real-time DD 5.1 encoding) is nVidia's nForce Soundstorm found on a few (not all) of nForce/2 boards out there.

4. I'm not fond of any pseudo-multichannel solutions myself (like Dolby Prologic or CMSS 1 and 2) and if any thing, these should make the sound worse in terms of quality because of the processing involved not better.

Actually, the whole thing is identical to any other sound card out there. Some sound cards don't have DRM protection enabled though but they also don't play (or can't play) DVD-Audio and the like.

I have heard that the DAC on the Audigy2 is superior to that on the Z-680, so therefore analog should sound better than optical in any stereo format (such as mp3 playback)

However, a lot of clicks and pops occur when playing analog mp3s around 192kbps or greater (with 6 channel direct or stereox2) that dont occur when I play them with the optical cables (stereox2 or PL2). When I turn on CMSS or CMSS2, the clicks and pops are reduced by about 80%, but still not as "click-free" as the opticals.

Is there a reason for this? Like maybe the analogs that come with the Z-680s are crap? Or something to do with the thin speaker wire you get from the box? Or neither?

If it happens only in Winamp, I'd fiddle with the buffer settings a bit. If it happens in all playback programs then I really don't know; it can be many things. I'd try uninstalling the sound card (and any driver/program leftovers from any previous sound card), pulling it out, placing it in another PCI slot and reinstall it.