That is unusual. I too have a Powermac running MOS 2.6. Initially I only used the built in sound because I couldn't get the SB Live to work correctly. Then one of the MOS developers (FaB) pointed out that there are five selections that need to be set in the audio preferences section. The first is the music unit (that is displayed when you bring up audio preferences). The other AHI units (0-3) can be set when you click on the icon to the right of the Music Unit line.
All outputs must be set to your desired output device, but in your case I would assume MOS would default to all five being Apple output.
Look, I know it would involve a minor expense, but an SB live isa better solution. The built in sound is just horrible. You can find a SB live card on Ebay for about $5. If you can't find one, I'll sell you one. You won't regret the minor investment. The sound quality is much better.
Oh and BTW, what do you think of 2.6? I getting a big kick out of it. Its lightsyears faster than OSX and boots rediculously quickly.
Good luck with your problem.
