SOLUTION FOUND
These were my initial settings, that did not work
Case 1: DID NOT WORK
SoundTap Options > Recordings Folder> C:\Users\Bob\Music
SoundTap Options > Sound Input device: Wave(Asus Xonar DG Audio Device)
Find and Play Recordings>Recording> All options grayed out
Find and Play Recordings>Play Options>Sound Play Device> S/PDIF Pass-through Device (ASUS Xonar DG Audio Device)
Windows sound playback set to - S/PDIF Pass Through Device (ASUS Xonar DG Audio Device)
Windows sound recording set to - Wave (ASUS Xonar DG Audio Device)
STATUS WINDOW SHOWS
Successfully connected to driver
But does not show "audio streaming has started" when music is being played through the sound card
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Case 2: AFTER TRIAL AND ERROR THE FOLLOWING SETTINGS WORKED
SoundTap Options > Recordings Folder> C:\Users\Bob\Music
SoundTap Options > Sound Input device> Stereo Mix(ASUS Xonar DG Audio)
Find and Play Recordings>Recording> All options grayed out
Find and Play Recordings>Play Options>Sound Play Device> Speakers(ASUS Xonar DG Audio Device)
Windows sound playback set to: Speakers (ASUS Xonar DG Audio Device)
Windows sound recording set to: Stereo Mix (ASUS Xonar DG Audio Device)
STATUS WINDOW SHOWS
Successfully connected to driver
Soundtap is receiving an audio stream
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Basically goes to show it's important to twiddle both the SoundTap settings and the Windows sound controller settings if SoundTap is not recording.
However, it still would be vastly preferable to make SoundTap work properly when S/PDIF is set to be the playback device, so that the sound plays through my nice Onkyo amplifier and seven speakers rather than through the ASUS sound card speakers.