What you need:
- Microsoft HD Pack (can be found on ebay every now and again).
- Soldering iron.
- Smallish phillips screwdriver.
- Drill and 6.5mm drillbit.
- Gold female phono socket (I use the inner colour of black, orange is also sometimes used to denote a digital input, its up to you. Bought from Maplin).
- Some wire.
STEP 1: Unplug the HD Pack from the xbox. Poke a smallish phillips screwdriver through the Microsoft sticker on the HD Pack and unscrew. You could probably use a hairdryer to peel off the sticker to avoid puncturing holes but I don't have one.
STEP 2: Take the sockets, wires etc out of the case so you're left with an empty case. Now put the empty case together and use a 6.5mm drillbit and drill where you'd like the digital phono socket to go. I put mine opposite the stereo sockets as I found the gap between the stereo and component slightly too close together. I drilled at the split point so you should have a half circle cut out on each half of the case.
STEP 3: Solder the wires as shown. Make sure they correspond correctly. Even if you do it wrong, Ive been told it should'nt harm the xbox. It'll probably just make a nasty noise.
STEP 4: Slot the phono socket onto one half of the case, screw the nut on the phono, not too tight though otherwise the other half of the case wont fit on. Bend the "tag" on the phono socket although not absolutely neccessary. It would be a good idea to put a blob of hot-glue to the nut and body of the case to ensure it wont wriggle free.
STEP 5: Put it all together and voila! You now have digital coax out! Remember to set the audio hardware output to digital in the Microsoft dash or in XBMC.
Enjoy digital bliss!