PC audio cards to Processor

If the audio cards software is set to 5.1 etc. the result is stereo where only two channels received by the processor and converted to stereo on the system.

I have experienced this same thing when viewing sources that send Dolby Digital Plus, such as streaming sources like Netflix. On some streaming devices, it doesn’t properly convert this to "normal old Dolby Digital" over s/pdif (i.e. toslink). The result is only 2 channels of the 5.1 being decoded and played by the processor. In my system, I HAVE to play Netflix over HDMI because that’s the only way the processor will properly receive and decode the Dolby Digital Plus signal. That being said, old school Dolby Digital and DTS is always compromised when sent over HDMI. You end up losing dynamic range and naturalness of the sound. The only thing HDMI is good for is the high resolution bluray audio formats (DTS-MA and Dolby TrueHD).

This could be a characteristic with your software or your device driver level or something else entirely. I don’t know what configurability you have currently, but see if there is a way you can configure your system to output 5.1 PCM over the spdif output instead of compressed DD/DTS. This is more supportable to processors sometimes.

As far as S/PDIF cards, the best one that is readily available now is the Asus Xonar Essence. It came in a few models (ST, STX and STX II). They all have an excellent RCA digital COAX output that also supports Dolby Digital and DTS. Drivers are available for download in Asus website and all support up to Windows 10 64-bit. The card is kind of overkill just for an spdif output because it’s costly and it’s also a full analog audio sound card, but there really isn’t anything else better. You can always find a used STX model on ebay for $50-100. If you can find a Musiland Digital Times PCI card, that’s a better spdif output, but they do not appear to be available anymore.

I cannot tell if the Xonar Essence will solve your dolby digital problem because I do not have direct experience. I can only advise on the best spdif computer card.

Great!  However, I would recommend setting your sampling rate to 48khz because SPDIF really cannot transfer 6 PCM channels at 96 or 192 khz.  Also, Dolby Digital / DTS would be a compressed version of 48khz anyways.  This way, you can ensure that you're getting the maximum capable bandwidth of spdif and keep full support of your McIntosh processor.

If, at any time, you want to listen to some 2-channel hi res 24/96 or 24/192 songs, you can always manually go into Asus control panel and switch it back to 2-channel PCM at 192.  But for gaming and movies, 48khz will be excellent anyways.

For the future gaming machine, unless the system or games will generate the hi-res bluray audio formats (DTS-MA and Dolby TrueHD), you are still better off keeping the Asus Xonar for digital COAX s/pdif audio output.  Hmmm, maybe setup two input configurations on your McIntosh.  On input that uses HDMI + digital COAX for audio, and a second input configuration that uses HDMI for both audio/video.

s/pdif can transfer 192 khz, but only for 2 channels.  When you try to push 6 channels, I don't believe it will support it.  If it seems to work with 6 channels at 192khz, then maybe something is different.

Also, you said you have the Xonar Essence STX II.  I don't believe this card has an optical output.  Only a RCA digital coax output.