Hi im also using edifier 5.1,
For this speaker to work nicely on xbox360 you need to get
an amplifier that can input optical. I have checked out the market
and so far found good amps like Yamaha or Pioneer but they
cost a bomb like RM 950.

Im also on tight budget but will consider going to Pasar road to find out..
just have to make sure the amp can really support 5.1.
There are fake 5.1 amps out there which only input stereo channel...
that one is alot cheaper but will not give you true 5 channels.. only stereo
sound on all your speakers. (no point...)

Other alternatives that i know off is to get a External or Internal Soundcard
that has optical.

Cannot bro... you need the amplifier.. unless your edifier got optical lor..
you see your output wires.. for PC you use 3 wires.. for DVD players you use 6 wires where you want to plug those in? Thats why you need an amp...

Decoder very hard to find unless you can find it at below RM 300 then worth it lor.. i heard its about 550 - 650++ for it...
So go Pasar Road look for a cheap amp that has Optical.. dunno if got annot.. i need to go there and look also later..

Creative speaker i notice the one with optical one have to spend about RM 900++
thats pricey lor.. might as well buy a Yamaha or Pioneer amp already for that kinda price..

Model of edifier im using is the R501 lor.. still good piece of equipment.. hehehe

1. and 2. is linked.. right on both
3. yeah correct you will get Stereo sound only and will put our edifier speakers to shame.. lol..

yeah sure but dunno when i will go hehehe
im not really in a rush to get it.. cause i got other priorities like
an lcd monitor first..