That is a very simplistic, and fairly incorrect statement to make. Yes information sent across a digital connection is data not sound, but what data is created and encoded before being sent, can be vastly different depending on the sound card.
If all you do is watch DVD films on your PC, then no there won't be a noticeable difference between cards, but when playing games, there could well be. The game produces sound code, which is communicated with the sound card using an API (DirectSound or OpenAL), and the resulting audio data can be different depending on how well designed the sound chip is for each of these APIs. This difference will produce different digital audio data even before you get to the ADC part of the sound card.
Also some cards also support live encoding of Dolby or DTS signals which the receiver can then decode to surround sound. Without this function, what you would get may not actually be proper surround sound.
Can't argue with any of that; I was looking at it from a sound quality point of view only. SB Z may perform better in games, but it's hard to tell how much difference there will be, as it's usually on actual quality of sound basis that people make comparisons. Most reviews mention it performs well in games, but not how well if you already have an X-Fi.
As for DD/DTS encoding; yes it is essential for 5.1 gaming over SPDIF. The X-Fi has this as does the Z series, but the X-Fi Gamer requires the DDL/DTSC pack from Creative's site. Not sure if that also applies to the low profile Gamer. It was the case with older full height card.
Thanks for the update. I am going to try analogue to see if there is a difference. I do play games with surround via optical and have always found it lacking. Maybe this is the way forward.
In what way is the sound lacking? Actual quality of the sound or positional sound and game effects?
It's possible that you don't have DD/DTS live encoding enabled on your X-Fi. If it is disabled, then the AV receiver will be getting stereo only from the sound card. It will then apply Dolby Pro Logic to that, which will upmix it to 5.1. You will get 5.1, but more of a pseudo 5.1. DD/DTS live encoders create a 5.1 stream in real time, so the receiver will decode whichever is being used as 5.1, as it would as if it were receiving DD/DTS from a DVD.
I'd check to see if you have either Dolby Digital Live or DTS Connect disabled first, but I'd also try analogue to your receiver as well, then choose which ever sounds better to you. If you find both ways are still lacking, then a SB Z might be worth considering; but it does depend on which area you think the sound is lacking.
If you find the actual sound quality is lacking, then I doubt a sound card upgrade will improve things a great deal. Ultimately, it's the speakers themselves and then the quality of the amp that dictate how good the sound quality is going to be. Depending on how you connect the card to the receiver, it can only do so much.