Hi Jagan, I can help you solve your problem.
The SPDIF output is a stereo 1/8" outlet, and you are hooking an adapter cable to it which gives you a Red RCA plug and White RCA plug. You are using the Red plug. Although
this link (from Creative Labs, maker of Soundblaster) says that the Red plug "carries no signal",
it does and this is what threw you off.
The Red plug carries a 48kHz PCM pilot signal that only sends sound to the 'rear channels' when you are in "4-Speaker mode", and silently mocks you in other modes. Damn those truth-twisters at Creative Labs. Damn them all.
Solution:
Use the White plug.
Don't thank me, Jagan, all I ask for is that you treat yourself to an early night's sleep so you won't have to feel like a zombie at work tomorrow. The more you help yourself, the more I can help you.
-JNS