Let me see if I can get this right: In the good old days of Windows XP, audio driver can choose to support DirectSound 3D and EAX interfaces so that those DSP can be done in HW, as what Creative sound card did. Since Windows Vista, all DirectSound commands are processed by WIndows audio system (dsound.dll) and they can no longer reach audio drivers, and EAX not supported anymore. GX, using WIndows Hook, intercepts all DirectSound commands and process them in driver SW. This means if GX is on, DirectSound 3D and EAX commands can be process by driver SW, and when GX is off, DirectSound 3D commands are processed by Windows audio system and EAX commands are all blocked.

The difference of 3D positioning you experienced is due to the fact that DirectSound 3D being processed by different parties. If the game uses EAX, turning on GX will have benefits. If the game does not use EAX but use DirectSound 3D, well, it depends on your own experience. GX mimics what dsound.dll does and it might introduce instability, and that's why you might want to avoid GX if it does not give you too much.