Using a PC with X-FI as Audio receiver?

[rwgast_lowlevellogicdesin]

I just went out and got an older core 2 duo with a geforce 8400 and x-fi extreme. I want to use this as an audio receiver and blue ray player. I plan to add a touch lcd and watt montior, it will be a project in the end. But for right now im kind of confused about something.

I want to start out with 2.1 sound I have two nice book shelf monitors and a 4 inch and 6 inch sub that i have filtered to different frequencies. I also have all the amplifiers covered! The sub amp is a prebuilt amp which will run both sub and mix two channels. The speakers will be ran on home made amps about 60w.

I would eventually like to go to 5 or 7.1 surround though. My TV has L/R out rca and it also has optical out. I see no spidf/RDCA didtial out. The SB X/FI has a spidf I/O port wich is a standard 3.5mm. For 2.1 I can easily use the L/R analog out, but if I want surround sound what is the best way to get the digital signal from my TV to the X-FI? Will the X-FI actually take a two channel audio signal and process it to 5./7.1? Or an I going to have to figure out how to connect that optical port to a 3.5mm jack? And if I do is that as simple as using a photo transistor/diode to convert the light pulses to digital pulses?

I think the x-fi sounds better than surround a\in a box and am willing to build what I need too, but I want one box that acts as the stereo processor and video player for any sound coming out the TV, I don't want any receivers that is the computers job!

[NiHaoMike]

Optical out is S/PDIF. Use an optical receiver module.