I've been using the CMSS3D approach this whole time. The effect is fairly decent for headphones (though makes voice and such audio not intended to be expanded also expanded, unless you keep the CMSS3D setting in the middle instead of maxxed out) and works with stereo speakers, but unfortunately does not work all that well (IMO) on surround configurations. It's dumb that they had to take out 5.1 decoding hardware on a $140 sound card that already has an optical input, and you do get almost the exact same sound with the Xbox plugged into the sound card via analog.
On speaker setups; to be honest, the only surround configuration I ever used is 4.2. That is, two 2.1 systems clumped together; I do not actually have a surround sound system. I don't even know if my setup is considered true 2.1/4.2 because the sound card doesn't output to the subwoofers. (Though that probably doesn't matter.) It kind of sucks because if I blast the bass too high, the back speakers can't handle it and will distort. (The sound card can output a LOT of bass in entertainment mode from the EQ, bass knob, and bass boost settings combined but unfortunately, high bass does not interact well with the Crystalizer.)
On the Xbox, you can select between digital stereo and Dolby 5.1, so I don't think the issue is the console refusing to give a signal. I've never worked with a PS3 though so I'm not sure how it goes on there.
In the (possibly near) future, I will likely be setting up a home theater sound system + new TV so I'll probably just migrate some setups into there to get surround sound and what not.
As an additional point of interest, many people around here find most features on Creative cards to be nothing more than gimmicks. However, nearly all of my audio sources (other than Xbox/PC games and DVD's) are not pristine, nor in lossless formats, so what aspects of a sound card actually benefit in that case? Is it merely audio fidelity alone that matters? (Which I don't think would help me that much; I have middle/low-end audio hardware; $20 headphones in particular.)