I think that the SPDIF on PC's is used to output a Dolby stream, like 5.1
In order for that to work you need to be running a card that can generate a dolby stream (this is a different thing than passing on the dolby stream from a DVD movie for instance).
I think you might be able to make use of ac3filter (ac3 is code for dolby digital) http://ac3filter.net/
this will multiplex a source into surround sound. I don't think it will help you game in surround over spdif though (it has been some time since I had a DD5.1 decoder, so I don't remember the specifics).
I think it is a pretty dumb setup myself, but there should be an option somewhere in your soundcard panel to output standard sound over the Spdif (I am most familiar with Realtek codecs, as they seem to be on just about every system I build, I always use the latest drivers from http://www.realtek.com.tw/downloads/
CAVE, see what all the fuss is about: