OK....one other question!
I had a similar problem.....do you happen to have a Promisa DMA controller in your system?! I do, and when I let MS update it's driver, is when I began having distortion and popping in my sound! But when I rolled back the sound driver to the original ones for XP, the sound was clear again. Don't know why, but for some reason they might conflict with each other. BUT, a month or so later....I tried updating the sound driver on a whim, and now I have no distortion!! My main place I noticed the sound problems was mainly when playing MP3's and such.
So try this first, go to device manager, roll back bother drivers using the driver roll-back feature (if you have a Promise controller) and then update JUST the Promise one. If no distorion after a while, then try updating the Aureal one. I know this sounds lame, but this worked for me, and I have both devices playing nicely with each other now!!