[Solved] Cheap 5.1 Speakers with Optical Input?

Hi all,
I have an Xbox 360 and a blu-ray player that I'd like to hook to some cheap-ish speakers. I had been using a 6 year old pair of Logitech Z-3's (a ~$40 2.1 speaker set back then), but they finally broke today. Ideally, I'd like to upgrade to surround sound.

I have never hooked up surround sound before and I am having trouble figuring out how it all works. I have both the blu-ray and Xbox 360 hooked up to a 28" monitor via HDMI, and I would love to get some cheap surround sound going. Is there anything cheap that has optical in so that I can hook the Xbox audio into it? I think my Blu-ray player decodes the audio, so I am fine using the RCA outputs for that (it's a Panasonic DMP-BD35).

I have a set of cheap surround speakers that someone gave me (Spectronic PHT-300x), but I can't figure out if I can get the xbox's audio into it.

Does the Xbox 360 decode its own audio if you use the component cables? I could just switch back to that if so.

Help??? I don't think I can afford more than $100, and most of the obvious solutions are $300+ (e.g. a set of Logitech Z-5500 speakers).

Thanks!

@MEgamer - could you explain/elaborate?

@anwaypasible - When I hook up the spectronic speakers with RCA audio from the blu-ray, will that result in surround sound? I can't find a straight answer as to if surround sound can be carried over RCA.

The problem I have is twofold - the Xbox 360 uses digital audio out, which means that the only way I am going to get sound to speakers is if they have optical input.

This is compounded by the fact that I do not have a TV - everything is hooked to a 28" *monitor* (Hannspree HF289H). The only way the monitor has to pass through audio is a headphone jack, but I think it equalizes the sound for headphones and it doesn't sound great over speakers. Worst case scenario, I'm just going to use that to connect to the RCA on the Spectroniq (assuming I like how the system sounds).


I am happy to buy used speakers or a used receiver if that is the only way to get cheap optical input - do you have any recommendations of what I should look for that I might be able to get for $100 or less?

Did some more digging and found a couple cheap chinese decoders last night too on ebay - the Mocha JY-M2 & HD Audio rush. I'm somewhat tempted by those if I can't find something good used.

Blu-ray player does not have audio inputs, only output. It has component, RCA, HDMI, and optical S/PDIF out.

The Xbox 360 is HDMI out, with the potential to also have optical audio out.

The monitor has headphone out through which it can pass the HDMI audio.

Nothing I own has digital input. The Spectroniq speakers have only RCA stereo and analog 5.1 inputs.

Best answer selected by BigMack70.