So if I understand correctly, as long as I keep everything digital, then a expensive soundcard is not needed.
Yes.
If I elected to let it do the decode and go analog into the receiver, then a better soundcard would be better.
Yes, but not recommended for the reasons outlined by the other poster. Without expensive equipment you're going to get significantly better sound quality output with SPDIF than analog RCA connections. Not to mention one cable instead of 6
Thanks. Wish I could go directly into the receiver instead of through a soundcard.
No, you already are going directly into your AVR through SPDIF. A SPDIF is always going to associated with a soundcard. What you want to do is basically set your sound card to "bypass" mode by sending the undecoded Dolby Digital / DTS streams onto your receiver. A sound card is always going to be involved in the picture, you just don't want it to actually do anything
All the resampling cannot be good. Thank you.
If you are sending Dolby Digital or DTS signals to your receiever, there will be no resampling. One of the advantages of those digital signals is that they can "inform" the receiver about the sample rate of the source material and your receiver will "re-initialize" itself to that samplerate.
For other, non Dolby or DTS sources, one of the big advantages of using WASAPI or ASIO is that they bypass the windows sound mixer and will also "inform" your AVR about the samplerate. Think of them as a digital wrapper around analog audio. So that's a reason why the Xonar actually does have a benefit, it would be able to handle the 44.1khz sources while your older sound card would not (and you would have manually resample 44.1khz material in the DSP Studio to 48khz. Yuck!)
But, ultimately, given your situation with using SPDIF, I would recommended wrapping analog audio in a Dolby Digital container (Look in the DSP Studio for this option). You cannot output multichannel analog audio over SPDIF. But you can output multichannel analog audio wrapped in a Dolby Digital container over SPDIF. With HDMI, which can output multichannel analog audio, you'd get better results using WASAPI or ASIO as your digital wrapper, but for SPDIF Dolby Digital is a better option. Which, in the end, takes away the one lone advantage to your Xonar card
Part of the reason it's all so confusing is that "analog" audio can mean two different things depending on the context.
An "analog" signal can mean PCM, which is actually a digital representation of analog audio. A DAC converts these PCM signals into genuine analog signals.
A real analog signal would be, for example, the signal transmitted out of your computer via an RCA cable (if you were doing the decoding on your PC), or the signal traveling out of your receiver to the speakers.