Vista - RealTek not detecting digital speaker.

Ok, so quick summary of my PC.

Its a prebuilt HP pavilion a6720f

(The only thing that I've added in is the graphics card, but that shouldn't effect the audio)

Vista Home premium 64

Motherboard
Manufacturer: Pegatron
Motherboard Name: M2N78-LA
HP/Compaq motherboard name: Violet-GL8E

Sound/Audio
High Definition 8-channel audio
ALC 888S chipset

Just got the latest RealTek driver today.

It only recognizes when I have analog jacks plugged in. eg. Head phones, microphone, line out, rear out. I have A very nice speaker setup, thought a bit older, Cambridge soundworks dolby digital theater 5.1 speakers. Model number is CSW 3500. I've spent about two hours with HP tech support to no avail, not that they tried very hard. Finally the guy told me it was a hardware issue with my digital audio out and to send my computer in to be fixed, except, the digital out recognizes that I have an SPDIF cable plugged in, it just wont detect the speakers.

Am I missing something in the set up or are the speakers just too old?

EDIT:

Also, we were musing about getting a new sound card, would it be worth it to install a new sound card just in general? or is that going to mess with my headphone jacks on the front of the computer?