The pins on the motherboard only pass the audio for the onboard AC'97. You can use both at the same time, though it might be a hassle, but different apps would have to be able to specify which audio system to use, otherwise they'd just use whatever your Windows default is. And as SpeedKing said, your headphones wouldn't be using the Live's audio.
The Realtek codec is ONLY doing the conversion between digital and analog. Muddy or tinny sound might also be attributed to the Intel AC'97 controller but could also be the drivers. Most people find the Soundstorm to be very good quality regardless of the external codec used. The drivers for the ALC650 weren't all that good from my brief view on my roommate's system before he put his Live back in.
Saying that the audio can't be carried over when you upgrade is silly. The chipset changes as well, but you don't try to use a chipset that can be carried over. If he upgrades later, then he just installs a card if needed and installs the drivers, or uses the onboard sound on the new board and installs drivers for that. Most people don't successfully swap motherboards without reinstalling or repairing Windows anyway, which requires reinstalling all drivers.
Video cards with TV out don't compare with TV cards, which only have TV tuners for input, not output. Cards with video-in/video-out are also not meant to compare with a TV card, since they don't have a tuner, they only accept RCA or S-Video input from an external device. All-In-Wonder style cards with TV tuners save a PCI slot and can be moved to another system. If you upgrade to another card without a tuner, then yes you've got to buy a TV card, but so what? Why is that a reason to never get a combination card? What happens if you buy a new TV card? You have to remove the old one and install the new one.