Okay, after downgrading Aureal drivers from version 2048 to 2041 I am now able to activate 3D Sound and adjust 3D Bias. Unfortunately Environmental Effects are now greyed out. I am not sure what exactly this feature does but I think it needs a true EAX card.

If you are wondering how D2 sounds now, it does sound a little bit different - slightly softer and natural and voice dialogs sound slightly more flat. Positional audio might be slightly better but its not very noticeable since this is a birds eye view type of game.
So I wouldnt say A3D is a clear improvement compared to regular sound or EAX. I think I will probably stick with EAX for Diablo II.

Side note: The 2041 driver that is supposed to fix the "Your Vortex adapter is not plugged into the primary PCI bus" error message causes noise coming from headphones. Using the regular 2041 driver does not do that. You can get all those drivers from Phils site here: https://www.philscomputerlab.com/aureal-vortex-2.html

Only 2048 has the preliminary EAX emulation. It doesn't sound so great.

All the drivers are on VOGONSDrivers too.

I have both an A3D and a EAX card for this reason.

Thanks guys.

2048 EAX kinda worked but I was not able to activate it in Red Faction for example. I also noticed 2048 had a ton of audio bugs in various games, voice dialogs too quiet, weirdly mixed, or cut too soon (Half-life), etc.

I think I will keep the Vortex2 card but only use it with the 2041 drivers and a handful of games where I think it is actually fun (mostly FPS games or some older games without EAX support). A3D (even with 2041) also drops my GTA3 from 200-300FPS to about 30FPS when there is too many sounds (cars honking, etc) - if I switch to other audio types this does not happen.

The number of EAX games that won't run in windows XP is pretty small. The Aureal vortex 2 is neat, and a good card for the time, but the sound quality on an audigy 2 or later is just a lot better.

After further looking into it, this is what the game log shows regarding audio:

---------------
Initializing sound engine...
Driver: Aureal - Vortex DirectSound Driver
Module: AU30WAVE.VXD
....DirectSound progress: Unsupported EAX or EAX emulation
DirectSound3D initialized
Hardware 3D buffers : 76
---------------

So what I am hearing through the Vortex 2 card here is not A3D after all but DirectSound3D. There is a noticeable difference between having the "3D Sound" option ON/OFF, so perhaps it is a difference between DirectSound and DirectSound3D? Moral of the story - just because an option says "3D Sound", its not necessarily A3D or EAX 🤣