Surround Sound issues

I had a friend recently install an ASUS ROG Xonar Phoebus Solo in my PC (MSI Gaming GTX 780m, SSD and HDD drives, 16GB RAM etc), which now is plugged into my AV receiver via SPDIF (optical), and that receiver supports my 5.1 speaker system.

The issue I am having is that launching FFXIV, all I am getting is stereo output out of my front R and L speakers.
Games off my STEAM account (Batman Arkham City, Borderlands 2, Dishonored) all have the surround sound active, just seems to be FFXIV ARR.

Anyone else had this issue? And any way to resolve?

Optical connections are very picky with what audio format is used.

Optical connections only support pass-through of dts and ac3 formats surround sound formats. All other formats are converted to and sent to the amp as stereo LPCM.

Most games output surround sound as 5.1 LPCM which cannot be sent over optical natively (so it falls back to LPCM stereo). If your soundcard supports dolby digital live or dts connect it can compress 5.1 LPCM into ac3 or dts on the fly to preserve all surround channels for output over optical (you have to enable this option manually for most soundcards). If it doesnt support it I think you can use ffdshow to compress lpcm into ac3.

Your best bet though (if your amp and pc support it) is to use hdmi passthrough as it can bitstream a much larger selection of audio formats (including higher quality formats such as dts HD) compared to how restrictive optical connections are.
A lot of the newer AMD graphics cards have the option to passthrough audio over hdmi (i havent used nvidia in a while so cant comment on their cards).

Reason why we selected this sound card was the fact it supports Dolby Digital Live and active conversion on the fly....which it should be doing for FFXIV, but it doesn't?

...and when I first got this PC and plugged it via HDMI directly to the amp, we found the video was a bit laggy...which is probably the problem of my AMP being a more lower end (Marantz NR1501)

do you have the windows sound settings set to 5.1?

Where would I do that on Windows 7?

Control Panel > Sound (or just type sound in the search bar)
Click the current playback device and then the configure button, complete the configuration wizard to set multichannel.

Confirming 7.1 Sound Via USB works perfectly. Must be an optical audio thing.