need optical INPUT

I'm stuck in a sucky situation:
I have a TV, but no reciever or sound system.
I have a computer with a turtle beach santa cruz, and a creative inspire 5.1 system, which to my non audiophile ears sounds great. I also have a radeon 9700 card with TV out. So this sounds great, right? I can just watch DVDs with PowerDVD and use the TV out cable to watch them on my TV. Well, it turns out that picture quality, for some reason, sucks with teh s-video TV out. Watching the DVD with my playstation 2 provides a noticibly clearer picture. Thus, my next problem is that I want the 5.1 dolby whatever-ma-bob that DVDs have.

You can see where this is going. Either I watch DVDs with my computer, with full 5.1 but reduced video quality, OR I watch them on my PS2 with better picture but only 2.1 (line in jack on the computer).

I either need a soundcard with optical input (thats what the ps2 uses) or I need some kind of way to get my computer to output a really nice picture to my TV. The PS2 can do it, why can't my computer? Anyway, if you guys can recommend a solution, I guess a soundcard with optical input (hopefully on the back of the machine) I'd be appriciative

Do you know where I can buy one of these? I can't find it online. The 5.1 Sky looks really good to me. Thanks for the suggestion!