Please Help . . . 5.1 sound & DVD errors

Hello. I've been trying to solve this problems for hours and need some help. Basically I'm trying to get 5.1 sound to work in DVD software (trying with windvd4 and powerdvd). At the moment when the dvd software is set to two channels the sounds works, but if I switch it to 5.1 sound sound plays intermidantly and the video jumps all around.

Current system specs:
abit nf7s mobo + xp 2500 @ 3200/400
512 mb ddr 3200 (2x256)
MSI gf6600gt
NEW Audigy 2 value
Kinyo 5.1 headphones
windows 2000 w/ latest upgrades.

I know my headphones are working because the sound and speaker settings in the creative audigy software all test correcctly and the sound works probperly in games.

I have an older pioneer 16dvd drive connected to the audigy 2 via the aux cable. The headphones are connected to outputs 1/2/3. I have speakers set to 5.1 in windows and in the creative control pannel.

What should I try?

Do I need to download any audio codec's or anything? I just reformatted?

What and how does spdif work? That setting in the dvd software works but I don't think its 5.1.

I'm not sure how all of the dolby digital works. I played around with its settings but that didn't do anything either.

Could it be my dvd player? Any discussion would be appreciated.

So with SPDIF, which does generate good sound, is it going to be 5.1 then asssuming I have my speaker setup for 5.1?

Well, spdif does not really work. The sound gets much quieter, very little bass, and the sound is not synched with the movie image.

My speakers are analouge (no digital), so i don't understand why it isn't working. I had a live 5.1 value which worked. The audigy 2 value doesn't.