You're getting 4 channels right now because of the Stereo X2 effect. The stereo X2 effect takes a 2.0 signal, mutes the center speaker, and transmits the L/R signals to each L/R speaker. Do not use this setting with a 5.1 output; only use this for stereo sources.
Back to business: toslink connections can really only transmit one of three things:
1: Uncompressed 2.0 PCM audio
2: 5.1 Dolby Digital Signals
3: 5.1 DTS signals
The only way to get more then a 2.0 signal out of a toslink connection is for the output to be encoded in Dolby/DTS formats (which are compressed enough to be carried over the connection).
Hence why DDL/DTS-C are so imporatant: They take whatever is being outputed and compress the signal in realtime into standard 5.1 Dolby/DTS signals, which can then be decoded at the end of the line (in this case, you're Z5500's).
Unfortunatly, the USB X-fi can't encode a non-dolby/DTS signal, so it does not appear you will get 5.1 over digital unless the source audio is already encoded. (In this case, movies that use Dolby/DTS will carry the existing signal to your Z5500's, but audio that is not encoded in Dolby/DTS will transmit as 2.0).
If all else fails, you could use the analog connections to hook the Z5500's to your USB X-fi. You lose some quality, but get 5.1 regardless.
Spdif/Toslink outputs a 2.0 PCM signal by default (due to either bandwith or lack of a spec for uncompressed 5.1). As a result, the only way to get 5.1 using a toslink connection is to encode the signal using either Dolby Digital Live or DTS-Connect. Hence why *most* soundcards offer DDL for free (And sometime DTS-C).
In your case, you Z5500's are fully capable of decoding a DD/DTS stream, so no problems there. As long as the card supports it, you just set the output type to Dolby Digital Live or DTS-Connect, and any 5.1 source file will play back as 5.1 on your speakers. If your card doesn't support it, I don't think theres much you can do...
*Note, if you play a 2.0 source, you still need to use Dolby Pro Logic to upmix the signal from 2.0 -> 5.1. I think the Z5500's have a Pro Logic Encoder though...
So If im connecting the creative sound card to my z-5500 hub vai toslink, i should still get 5.1... cause its just using 4 speakers and the bass right now... im not sure how to do this exaclty...
I have my z-5500 hub on the optical input and effect is stereo X2... How do I do this... I am so very confused???
Or am I stuff with 4.1 stereo X2 durin gmusic playback of mp3/flac
You're getting 4 channels right now because of the Stereo X2 effect. The stereo X2 effect takes a 2.0 signal, mutes the center speaker, and transmits the L/R signals to each L/R speaker. Do not use this setting with a 5.1 output; only use this for stereo sources.
Back to business: toslink connections can really only transmit one of three things:
1: Uncompressed 2.0 PCM audio
2: 5.1 Dolby Digital Signals
3: 5.1 DTS signals
The only way to get more then a 2.0 signal out of a toslink connection is for the output to be encoded in Dolby/DTS formats (which are compressed enough to be carried over the connection).
Hence why DDL/DTS-C are so imporatant: They take whatever is being outputed and compress the signal in realtime into standard 5.1 Dolby/DTS signals, which can then be decoded at the end of the line (in this case, you're Z5500's).
Unfortunatly, the USB X-fi can't encode a non-dolby/DTS signal, so it does not appear you will get 5.1 over digital unless the source audio is already encoded. (In this case, movies that use Dolby/DTS will carry the existing signal to your Z5500's, but audio that is not encoded in Dolby/DTS will transmit as 2.0).
If all else fails, you could use the analog connections to hook the Z5500's to your USB X-fi. You lose some quality, but get 5.1 regardless.