can you not use a toslink optical cable?
or, from microsoft -
"If the receiver or amplifier has a digital audio input jack, you can use an optical Sony/Philips Digital Interconnect Format (S/PDIF) cable instead of the standard red and white analog connectors to receive digital audio. Digital audio input produces higher-quality sound than analog audio input produces.
To connect the Xbox 360 console to a digital audio system, follow these steps:
1. Follow steps 1 through 4 in the "Connect an Xbox 360 console to a high-definition TV" section or in the "Connect an Xbox 360 console to a standard-definition TV" section.
2. Connect an optical S/PDIF cable from the AV connector on the Component HD AV Cable to the digital audio input jack on the receiver or on the TV.
Note The Component HD AV Cable does not include an optical S/PDIF cable. The Component HD AV Cable only includes the optical connection port. Therefore, you may have to purchase an optical S/PDIF cable separately. The S/PDIF connection port is located at the end of the cable on the base of the AV connector that you use to attach to the Xbox 360 console.
3. Turn on the Xbox 360 console. In the System section, you can change the audio and the digital output settings. Select the appropriate digital audio setting for the system."
taken from here