Answer:On a good day, lipstick.
Since: Jun 24, 2004
I'd likely say that it's Patchmix that's your issue here. Make sure you have a session set up that's Digital (the default should work fine, and it should find your digital input just fine. Then make sure that the routing (top right hand side) of the output is correct. Good luck. Patchmix can be a little tricky. Also, you're only going to get 44.1kHz through that optical cable, so make sure you have the 0404 set correctly. None of that 96kHz for you... It will likely default back to 44.1, so it may not be an issue.
I can't speak for the way Audacity works with the input as I don't use it. Have you considered Kristal or Reaper? Much more powerful DAWs in my opinion. I know they both register a digital signal through a PCI0404.