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I never installed the suite.
So you have the same model card? You set "SPDIF Out" to the default device and sound works in games? Can you mute "Speakers" and still get sound from "SPDIF Out"?
It does show two separate devices in the Windows 'Sound' CP, and they can both provide a signal simultaneously, but the digital "SPDIF Out" doesn't act like a completely independent device. The analogue "Speakers" device is the only one that can act as a default system device, and the "SPDIF Out" can only forward/clone the contents of the "Speakers" device ('Play stereo mix using digital output' must be enabled).
If i disable 'Play stereo mix using digital output' and set "SPDIF Out" as the default device, games don't acknowledge it and I get nothing but silence.
If I want the "SPDIF Out" to play all system sounds, 'Play stereo mix using digital output' must be enabled, which ties it's volume to "Speakers". I can turn down the volume of "SPDIF Out" without affecting the level of the analogue out, but turning down the volume of "Speakers" will simultaneously reduce the volume of the "SPDIF Out" digital signal, because as I said, "SPDIF Out" will just be a clone of "Speakers".
The only way for the "SPDIF Out" to be used independently, is if you disable 'Play stereo mix using digital output' and specifically tell a certain program (like Foobar 2000) to use "SPDIF Out"as it's output device. Then "SPDIF Out" volume will be independantly controllable, but it will output nothing but the sources you have specifically assigned to it. I think there are hardly any games that allow to to specify exactly which audio device to use - they all just look for the default device, and as I said, when the "SPDIF Out" is the default device, the games don't use it anyway.
Further reading suggests that this is normal behavior for this card.
I understand how you have it set up now. But bear in mind that you cannot get hardware accelerated OpenAL with EAX that way (which is probably the biggest reason for getting an X-Fi card in the first place).
Did you set "Speakers" as the default device? If you still had "SPDIF Out" as default, then the game would probably still be bypassing the hardware acceleration. I have absolutely no doubt that EAX works via "Play Stereo Mix using Digital Output" - I've confirmed this with multiple games. After all, it's just cloning the "Speakers" device, so anything that device gets, "SPDIF Out" will get too.