Surround sound?

From the Main Menu, select Options -> Audio, and make sure that the "Force Stereo" box is unchecked.

(Note:  As this screenshot shows, the "Force Stereo" control simply overrides whatever your current Windows setting might be. 

So make sure that you have Windows correctly configured for Surround Sound first.)

DAO Audio Options Screen

No change.  And it was unchecked to start with.

Sound works in everything else just fine.  Latest drivers etc..  so not sure what is up here..

You are dealing with a relatively elderly game; perhaps your drivers are "too new" and incompatible, so have you tried any other audio drivers? 

Nope..   If it is going to be that hard an issue, I will just leave it alone...