Might have been possible in XP, but not in Windows 7 due to the re-written audio stack.
It was definitely possible in XP, I used it thousands of times at this same PC. I can output different streams at the same time (Lets say, I put some song to play in WMP12 through SPDIF, and I put other song in MPCHC and play it through 3.5mm speakers.)
Is there any tweak, hack or anything that would allow me to play something in one player and output through digital and analog at the same time? Because as I can see this is due to the software blockade in 7 and has nothing to do with hardware part.