I might have found the solution to the optical problem (above)

What it is, is that by default the Audigy outputs optical data at 96khz, most optical equipment (my MD included) will not operate at such frequencies, and will refuse to accept that there is a signal.

The solution is to wind the SPDIF operating frequency to 44.1khz or 48khz (depending on the input equipment, higher is better)

This should then work. I've not tried it (as I'm at work) but I'll give it a bash when I'm back home.

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If I had a brain cell, it would be lonely...