On my system i have Sound Blaster Live! soundcard, Boston acoustic digital speakers and am running Fedora Core 2 with alsa drivers. This is how I got digital sound working:
1: open alsamixer using terminal (do not right click on the sound icon at the bottom right corner of the screen) Type alsamixer to open. Using arrow keys scroll all the way to the right. The last bar for me was called <sb live> and displayed "Sb line Analog/Digital output jack = off". Highlight this bar and press "m" on your keyboard. You now have Digital sound.
Ok now for sound from your cd-rom
2: open menu, sound and video, audo mixer and put a check in the "rec" box under cd option. Or if you prefer terminal type: aumix -c 100 -c R
under Fedora core 1 I did not have alsa and i used emu-tools to accomplish digital sound. http://sourceforge.net/projects/emu10k1
Have a nice day