This is probably a stupid question, but does XBox have optical audio output? I just got one, and I assumed it did, but apparently not. Do you need the DVD kit or something, and are many games in Dolby Digital/DTS?

You need to buy the Advanced A/V Pack or the High-Def Pack to use an optical output. The plugs that come with the Xbox won't do the trick. Get the High-Def pack if you have an HDTV, if you only have RCA ports or S-video ports go with the Advanced A/V Pack.

And almost every Xbox game has Dolby Digital 5.1 encoding on it.

Cool, thanks!

Do you need an HDTV to use this? My Vega has component input, but it's not HDTV.

No component is component, regardless. That's just MS marketing dept coming up with the name "High-Def Pack".

BTW I always thought it was rotten that the Xbox didn't come standard with an optical out. After all 5.1 is one of the big selling points of the system, and there is one on the PS2. At least the pack isn't very expensive.