The audigy encodes to 5.1 (or 6.1 or something to that effect) and outputs it via a digital output. the optical in is only a stereo S/PDIF digital input and has no decoding capabilities. thats why it will not play your dvd audio. so like you said you need an external decoder. kenwood and alpine both make decoders also try doing a search on ebay for a standalone decoder. I know that Klipsch used to make one and you can find it on ebay.