Updated my drivers to the current X-FI xtreme music drivers... on reboot it will disable the digital output. Tried reformatting thinking it might be the codecs I have installed, nope didn't work. It's easily fixed by switching the mode to Game and then back though...
I have this same glitch. I go to Entertainment Mode, Click on the setting for the Flexi Jack, just change it from SPDIF to MIC and back to SPDIF. It then kicks in. Mine never did this before my last two motherboard BIOS updates. This works with the Audio Console or the Entertainment Mode GUI thingy. You don't have to reboot.