It sounds to me like you need to configure your digital inputs.
Hook up the optical input from the back of the XBox to your receiver's Optical 2 (STB) input, then press [EXT-IN] until you see D-IN 2.
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"When the Know-Nothings get control, it will read 'all men are created equal, except negroes, and foreigners, and Catholics.' When it comes to this I should prefer emigrating to some country where they make no pretense of loving liberty – to Russia, for instance, where despotism can be taken pure, and without the base alloy of hypocrisy.”--Abraham Lincoln
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