I’d recommend strongly against getting an SB Live!. They’re pretty old, with poor driver support and relatively poor audio quality to the cards of today.
What connection does the reciever use for digital input? If it’s got both optical AND coaxial, you’re good no matter what. Does it also have 5.1 analog input?
The main issue here is that you’re not going to be able to send a Dolby Digital signal from every source. Most likely you’re only going to get Dolby Digital from DVDs, where it’s just sitting on the disk and is passed through the digital output. From other sources (games, music), you’re restricted to using digital stereo or analog 5.1 sound.
How important is 3D audio in games to you? I think your best option is the Chaintech AV710. It’s a 7.1 card with optical digital out, and best of all is under $25. It’s also gained much fame as the best consumer soundcard for headphones. Its analog surround sound isn’t all that great, but it’s still probably better than the SB Live!. The only real downside is that its support for 3D audio in games is lacking, as it has no hardware acceleration for 3D sound and doesn’t support the latest standards. Of course, the SB Live! doesn’t support anything beyond the original EAX standard anyway.
If the Chaintech AV710 won’t cut it for you, your best bet is the Creative Labs Audigy 2 ZS. It offers the best 3D sound support currently available, and very good quality for analog surround. The downside is that they retail for around $85.