You are correct. That little monster is known as the AC97. Putting that on a nice motherboard and calling it "digital audio" is like selling a new car with an AM radio and calling it "high fidelity sound."
If you're going to upgrade, do yourself a favor and stay away from the Sound Blaster stuff. They have a card called the
Audigy Pro; it is NOT a "pro" level card; it is good for playing video games and impressing 12 year olds.
You need a card the is low latency or an interface that offers "no latency" monitoring.
Latency basically means delay. If you are monitoring through a sound crad that has high latency, then you'll hear your guitar
after you play a note... not
when you play a note.
I use the
Audiophile PCI card. As far as sound cards go, it is THE best deal on the market. However, there are a ton of Firewire interfaces that are flooding the market that allow you to plug in your mic and/or guitar directly. And they have their own outputs for headphones and monitors, with no latency when you listen to what you're recording.
If you have a ton of analog gear (DI, pre-amp, etc.) then you don't have to buy one of the fancy interface units; you can get by with something like the Audiophile. But the new Firewire interfaces are easy to hook up, easy to use, and there are quite a few that sell for less than $200.