[ sorry, some of this ended up as thinking-out-loud, have tried to coherentify it ]
... one of the systems I used had an MSI motherboard with Realtek onboard sound (AC97) and it worked perfectly.
I tested it both as the main sound source and as the headset sound.
I saw a previous comment of yours about that, hence my remark about possibly missing some obvious option somewhere.
The Sacred Text for the Abit TH7II board is a bit thin on detail, and says not much more than "AC97 Digital Audio controller integrated" and "AC97 2-channel Audio CODEC on board". The bit on driver installation mentions 'ALC 100/200' and the Realtek site lists ALC 101 and 201 in the 2-channel section, as distinct from 6-channel and 8-channel chips.
The Realtek control panel sound-position test does put the sounds in the right place, but ultimately that's doing stereo things to stereo sounds for a stereo output.
This is with XP Home SP3, all patched/drivered up, and directional sound on everything else seems to work OK.
Could it be a chipset related problem ?
I am wondering if the chipset is seen as, or declaring itself as, capable of lots of things when it isn't, and I can't shake the feeling that the root cause is that the chipset does not have a 'native' 5.1 capability - so even if the driver doesn't go 'eek', it might be that it isn't coping as well as it might. The reason I lean towards something like this (e.g. behind the sound API, is something perhaps being automatically 'corrected' by the system or driver, beyond anyone's control?) is that eech-1.13 on the win98 box (Creative AudioPCI, again 2-channel only, no 'native' 5.1) has the same direction trouble.