The Logitech system is probably one of the best PC speaker systems you'll ever find according to a lot of forums, though they maybe perhaps talking about the speakers not the control console, I still find it difficult though to believe that the Logitech system could be the cause of my fault as it is a reasonably expensive set designed specifically for interaction with a PC.
Thanks to everyone for their advice, it led to a few really good sounding setups, specifically SPDIF sounded great and when connected via Optical I was able to get the system to accurately decide whether to bother to apply Dolby ProII or whether it was a genuine HD 5.1 source and didn't require it. Main problem with that was that XBMC soft mute wouldn't work because XBMC is allowing the Logitech to control literally everything including volume. Secondly there were issues with the wav sounds and TTS whenever watching a genuine 5.1 movie (they would queue up as previously described). I managed to get the PC to send TTS and Wavs to the projector via HDMI whenever a 5.1 movie was playing, but with regard soft muting so that the Mic can hear me properly; the logitech has no IR codes to set specific volumes (I can only get it to dial down very gradually by sending 'volume down' multiple times) I decided SPDIF pass through was just not feasible and went back to the drawing board.
Right then, following hours and hours of testing and swapping settings I believe I have found the best possible setup for Logitech z-5500's when used with XBMC and if you intend to have Vox commando perform soft mute (being as that doesn't work with SPDIF pass through). You wouldn't believe the amount of seemingly unrelated and even seemingly more accurate settings that have resulted in the following symptoms...
Odd hissing when nothing is playing
Barely any surround in the rear speakers
No Wav or TTS sounds
Soft mute not working
Stereo only in anything not 5.1 instead of Dolby conversion
No center speaker in any true 5.1 sources but everything else working
Unnecessary Dolby applied to full 5.1 sources
The settings are included below for my own reference and for anyone that may be struggling and googling for an answer...
XBMC
Direct sound Primary sound driver
Analogue 5.1
Xonar DG Audio Center
2 Channels
PCM 96khz
2 Speakers
SPDIF Out ticked
Logitech speakers
Effect 6 channel direct
Input Direct
Sound (Control panel)
Default Device set to Speakers
Speakers configured for 2.0
Properties -> Advanced -> Set Default format to 24 bit 192000 Hz
Right then, time to go try out the wireless audio box that Kalle recommended to see if I can get audio from the upstairs PC in the kitchen, it arrived today
Thanks again everybody, as always you have pandered to typical ineptitude.
-P