Distorted Sound From HTPC

[coldshot]

I recently got a Soundblaster Z card which i'm using for my HTPC.

It works fine when i output the audio via my PC speakers.

However when i output to my receiver (Panasonic PT560) via the soundcard's Toslink optical output for watching movies or playing music, I get this weird echoing feedback.

The receiver has Dolby Pro Logic II.

It's hard to describe the sound hence I recorded a short clip of it.
http://www.2shared.com/file/2i_J23j9/sound.html

Fast forward to the middle and you'll know what i mean.

I have AC3 filter running in my PC.

I'm thinking it's due to the way the signal is being passed to my recevier but i can't figure it out.

Would greatly appreciate some help as it's really driving me nuts

[leroys1000]

Your sound card probably shows as at least 2 devices at control panel/sound/playback tab.
Are you making the digital output default playback device when using the TOS link?