<< DD encoding/decoding is not a big deal. PowerDVD and WinDVD do it and that's all you really need. DD will not be used in games because EAX and A3D are much better methods of positional audio...
Dolby Digital is for movies... >>
Thats all hearsay. One of the major things behind the Xbox is the fact that it will have real-time DD decoding in its games. DD has 6 discrete channels as was stated before so developers can send a ricochet or explosion to the rear left or front right without sending it to any other channels. A3D is and always has been a 2-channel format and EAX only projects the front channels to the rear with a slight reverb. The rear channels are not discrete.
DD has been around a long time by tech standards. The first DVDs had it almost 4-5 years ago. The only reason DD hasn't come to games yet is because of the tremendous processing power it would take to produce 6 discrete sound channels while they are changing. In movies the soundtrack always stays the same, so you can buffer part of the signal and start decoding before the sound needs to be played. In a game, if someone decides to move left instead of right, the signal has to change. So there can't be any buffering without screwing up the sound accuracy. Without any kind of buffer, you'd need extremely fast decoding.
Thats why Nvidia's sound chip is supposed to be so groundbreaking. If it can effectively pull off DD decoding in real time for games where it is implemented, it will blow away any other cards on the market.
However, as far as straight sound quality (signal/noise ratio) goes, your guess is as good as mine. We'll have to wait and see.