Yes, games go through the same cable, although I already mentioned that I replaced the RCA analog connection with a optic fiber line.
Funny, the in the Console Settings => Audio of the XBOX, the only choices I have are to select "Digital Audio", which leads to 3 different choices: Digital Stereo, Digital 5.1, and Digital 5.1 with something (I forgot, I'm not home now)..
My setup is pretty good---Polk Audio RTiA3 bookshelves + Pioneer receiver with 110w/channel + 15 inch Velodyne sub. It's not that it doesn't sound good---it does, but when I compare the sound of the MP3 played by the XBOX, and then the same MP3 played by the internal Pioneer AV receiver USB port, the difference is big. The XBOX 360 sound kind of lacks the crisp and sounding highs and mids, I don't know how to explain...