I double checked all the cables, ran the audio system self diagnostics, every speaker works fine. I also checked all the possible settings in the "Supreme" FX software = nothing. Before the HERO I was using a gigabyte 990xa-ud3 am3+ MB everything was perfect - loud and clear sound, 5.1 when running 5.1 apps, and stereo when running in mixed mode, then it automatically goes back to 5.1 = flawless. With the HERO the sound is just "meh" and it was suppose to be "Supreme" cant even run a 5.1 with optical cable - the easiest to set up option. Im starting to suspect the DTS "Neo" codec or what ever "Neo" stands for. Thats my home theater system it does support Dolby Pro Logic II, Dolby Digital and DTS. My guess is the build in sound card is sh*t or the drivers are f'ed up. Will wait for some more competent reply, hope this gets fixed, I'd hate to return the Mobo for that reason, while I spent so much time on installing it and hiding all the wires in the case...

Most games do not produce 5.1 DTS, so you only get PCM signal over the TOSLINK. If you want surround in games you need to use analog cables to your receiver. Maybe your old motherboard had a special conversion function? I know some old Soundblasters could do that.

I dont know if it was DTS or not , but the sound was 5.1 in games, in movies, and it was with nice quality. The TOSLINK worked wonderful on my old MB. I expected this new MB to be the same, if not better, after all aint the damn Optical port standart for every device? Just plug it in, set the desired sound output (channels / speakers) and listen to it... But no, this MB doesnt work that way. I cant use analog cables to my reciever, cause the model has only "Left and Right" AUX INs. The 5.1 mode, I guess, is suppose to work only with the Optical or via HDMI, and so it should since these two options give the best quality, but asus is like "fk it we don't care how your system is suppose to work, buy a new one to suit our product"...

Hi moondarck

Not sure if this will help as I don't use digital output myself but try right clicking on the volume control in the system tray and select Playback Devices > Realtek Digital Output > Properties
and make sure the following are selected

Supported Formats Tab
Encoded Formats: DTS Audio & Dolby Digital
Sample Rates: 48.0 kHz & 96.0 kHz

Enhancements Tab
Loudness Equalization

Advanced Tab
Default Format: DTS Interactive (5.1 surround)

TOSLINK is an old protocol and it has bandwidth issues. Anything above 44KHz will only be sent as stereo. Other than that, yes it is pretty much plug and play. Make sure default sound format is 5.1 DTS surround. Check your game to see if there are any audio settings there that might help. And also make sure the receiver is set up correctly. The soundcard will convert whatever the application is producing to the default format you set, but it will not add surround effects. However, in most cases, a receiver will be set up to send stereo signal to all speakers and that may sound like surround, but it is not. Most receivers also have indicators that show the current sound format. If it is surrond, there should be a "DTS" or "Dolby Digital" symbol that lights up. If it is something else, the "PCM" lights up. If it is pure stereo it usually says "Stereo".

Bottom line: The application/game must deliver the correct DTS 5.1 Surround signal if you want surround sound through TOSLINK.

PS: If you only want to listen to music, set default sound format to 24bit/96KHz and set receiver to "Stereo Only" (or its equivalent if it has such a function). Then you get full enjoyment of the onboard sound, which is pretty decent.

Here are few things you need to understand about SupremeFX (Realtek ALC1150):

OPTICAL :
PCM 2.0 - YES (lossless uncompressed format)
PCM 5.1 - NO (lossless uncompressed format)
DTS (5.1) - YES (lossy compressed format)
DOLBY DIGITAL (5.1) - YES (lossy compressed format)

When you play DVD, Blu-Ray, video or audio files with compressed DTS/DD through optical to your Home Theatre receiver you will get 5.1 sound.
Most games will output an uncompressed PCM stream to your receiver (home theatre), although optical only supports PCM 2.0.

What you have to do is as Sparax suggested:
First:
1 - Under the advanced tab you have to set your Default Format to DTS Interactive (5.1 Surround), this way the SupremeFX will encode the outgoing stream as a compressed DTS signal for your home theatre to decode.
2 - Turn off DTS Connect under Enchancements Tab if you want a pure 5.1 signal for games, turn it back on if you want 2-channel music audio to be upmixed into 5.1.

Incidentally, nvidia's HDMI out support the following formats:
HDMI :
PCM 5.1 - YES
DTS - YES
Dolby Digital Plus - YES
DTS-HD - YES
Dolby TrueHD - YES
Dolby Digital - YES

As you can see many more formats, and PCM 5.1 should be the best quality for games. But you will need an AV Receiver that can handle these stream formats.

Correct me if I'm wrong?