The only way to get true 5/7.1 is with analog, or HDMI UNCOMPRESSED like from a xbox, and ur pc (depends on factors to get just 5.1 for I have yet to figure out how to get dolbly atmos to work or 7.1 to show up, but can do 5.1 uncompressed all day long through hdmi) off point sorry, but with optical it does but 2.0 and that's it. When you flip "dolby digital live, it FAKES surround form 2.0 sources and THATS IT. It even tells you when you turn it on that it makes it "surround" from 2 ch audio. That's on the pc side of things.
NOW you can play movies, and games that are able to do 5.1 (no better) from optical, but its mostly 90% all going to be 2.0 coming from ur pc unless you fake it with dolby live. Consoles are totally different and all the games can do 5.1 from optical from them, but pc's are different, movies and games have to be coded to do true dolby 5.1 off a pc to get it so mostly think of Dolbly Live as a fancy Dolby prologic kinda from back in the day when they made "surround" from stereo or movies.
Now if someone can show me 5.1 other then dolby live to show up in the spdif setting, like what op above me is showing, ID LOVE to see it
I personally am a analog kinda guy. If you hooked it up in analog to your system, using the audio jacks, ur sound card will then spit out to the correct speaker if coded in surround and NOT fake it if what ur playing is codded correctly for surround sound, of which you will know if the game ur playing can spit out in uncompressed 5/7.1 for in its audio settings of the game, it will say 5.1 or 7.1, if not only real way to get ur game to play in surround is through HDMI if you see that in game audio settings through HDMI only, OR just say heck with it, and ur audio source will let you, run them analog cables and call it a day and then you can set ur pc to 5/7.1 and enjoy it. Sometimes that one cable to rule them all (hdmi/spdif) is not all its cracked up to be if you are looking for all the time true surround sound from ur PC, for again consoles that can are totally different in the way the games are codded for that system, so hook up 3-4 more analog cables to ur pc, and enjoy surround sound, and better sound IMO for its not compressed like digital is, and I personally can hear a difference.
This is a list of games codded in DD (NOT LIVE), and to play these games in TRUE DD over SPDIF you need to turn DD LIVE OFF or say heck with it and run the analog cables of which ur sound card will do whats needed in these games off the list, of which most are VERY old and only a handful will do Dolby Atmos! Click me.
Dolby Atmos supported PC games (over hdmi and if ur pc and audio system can do this codec) Click Me.
taken from toms hardware:
So, what exactly will Dolby Digital Live do? I play some games that only support stereo, but my receiver uses prologic to make the stereo audio come out of all my speakers sounding the same. If I use Dolby Digital Live will this make the game output as 5.1 with positional support?
Dolby Digital Live encodes any audio stream to Dolby Digital format. Note, if the source is beyond 5.1, the extra channels are dropped. Also note, no upmixing is performed (2.0 audio encoded using Dolby Digital Live will still output as 2.0 audio, even though the format itself is 5.1; Dolby Pro Logic/CMSS3D can still be used to upmix, however).
Dolby Digital Live has one purpose: To make a 5.1 stream fit over an optical/coaxial digital connection. (Uncompressed 5.1 audio is too large to fit over a SPDIF connection, where compressed formats like Dolby/DTS are small enough to fit).
SEE HERE (click me)