One, you need to enable digital-out on your sound card.
Two, you need to buy an RCA to stereo-mini 1/8" converter, for $7, say at Radioshack. Use the 1/8" stereo mini end on the digital out of the Creative sound card, and RCA mono (white) end on a digital in. (As a digital coax cable is just a 75-ohm video RCA cable).
When you go optical (or digital in general) you lose discrete channels. Digital is 1 channel. In effect it can only carry a stereo signal. Dolby Digital and other encoded algorithms can pass through because they are like ZIP files--all the channels are compressed and if you have a decoder at the other end for the process, a Dolby Digital or DTS decoder, you will get all channels outputed. If not, the uncompressed stereo channels are the only ones that pass through.
For gaming, if you want all 7-channel glory to pass through the digital medium, you need something like a real-time Dolby Digital encoder, that takes all the discrete analog channels and compresses them into this encoded format. A couple of sound cards do this, such as the Blue Gears X-mystique, and the Turtle Beach Montenegro. I believe both these cards are near the $100 threshold (or beyond). They are also limited to EAX2, but I wouldn't worry too much about EAX, it really just maintains two primary functions--1) an equalizer that exaggerates reverb effects 2) combines the sounds of two environments as you are leaving one into another, for a transitory sound. They aren't terribly exciting.
If surround sound gaming is not at the top of your list (and it wasn't for me, and avid gamer; I just use headphones for that kind of stuff), and stereo for music, and dolby digital for movies alone is satisfactory content for you, then you could check out the Chaintech AV-710. It has an optical out, as well as line-outs for analog 7.1, and a secondary stereo output that has very high quality DACs. All this for about $20. A thin digital optical cable (about 4.5 feet) is included with the package, but it is kind of frail and you might want something beefier.
If you have any other questions, I'd be happy to (attempt) to answer them for you.