Thank you for the reply evilcat.
I am using a cheap 7.1 soundcard, that I just got for the optical input to hook my PS2.
It's this model here: (oops, the forum won't let me post links, I'll disguise it) [www].cmedia.com.tw/?q=en/PCI/CMI8768
On the matter of the signal, I have tried 2 different games that support Dolby Prologic II sound. Made sure all options were on and everything.
I have no idea how to make sure my "PS2 is outputting SPDIF pass-through, and not the decoded signal".
Thanks for the help, I'll keep trying till I get it fixed.