I have another theory about this, let me explain:
I think that when you check "enable digital audio" (this checkbox is available in both Windows 2000 and XP in the Device Manager, under the properties page of the CDROM drive) Windows just enables an API or something similar that allows applications to play back Audio CDs through the ATAPI bus.
I didn't say "PCI bus" because most new chipsets have an independent bus for ATA/ATAPI devices that bypasses the PCI bus (intel uses Hub-Link, VIA uses V-Link, nVIDIA uses HyperTransport and SIS uses MuTIOL). They did this in order to alleviate the saturation of the PCI bus when you have many cards installed.
However, even when "enable digital audio" is checked, you can still play back music using the analog output of your drive.
I could confirm this with Exact Audio Copy, using it as a CD-Player. I checked the "enable digital audio" checkbox in Windows Device Manager, and then I went to Exact Audio Copy and pressed the PLAY button. Then the music started to play through the analog output.
How do I know this? Because I opened my computer, disconnected the analog audio cable, and the music stopped! Then I re-connected the cable and I could hear the music again.
This happened both with EAC configured to use "ASPI interface", and "Native interface for NT".
Greetings.