I have done the same thing with my soundblaster card. The high end ($150+) soundblasters have digital outs. Honestly they don't sound all that great, even going through a DAC. I note that I used a long (6 foot) optical cable. I ended up selling the DAC, and using the equally crummy analog outputs. I speculate the crummy sound was related to the cheapo-depot transports used in computer cd roms.
If it's gonna be bad, it might as well be cheap ! You might want to check out guitar center. They sell some more pro-quality pc soundcards at significant discounts. Note that some of these 'musician' soundcards are not certified compatible for many games.