I have an X-Fi HD USB that I've been using with my laptop with no problems. So I went ahead and connected my PS3 to it via the Optical In port. I configured the audio settings in the PS3 to Optical Out and have only the 2ch linear PCM 44.1khz and 48khz options checked as I know that the X-Fi HD Optical In can't decode Dolby Digital 5.1 or DTS which is fine. The audio started working perfectly in the PS3 menus and the I/O tab in the x-fi console is showing 48khz as opposed to No signal/Unkown signal. Everything seemed good until I tried to play a game and have absolutely no audio in the game. Tried several more games with no luck. The I/O monitoring still shows a 48khz connection while in the game and as soon as I exit to the PS3 menus I have audio again.
All I can really think of is that the games are trying to play DD5.1 or DTS, but I figured the I/O monitoring would switch to Unkown Signal if that was the case. Also I only have the 2ch PCM option checked for audio output in the ps3 anyway. There arn't a lot of options to play around with so I'm at a loss. Any ideas would be greatly appreciated.