The Audigy 2ZS can support up to 64 sound channels. The game appears to be able to support 128 channels, so setting the game to 64 with the Audigy 2ZS is a very good idea. The game should merely drop any sounds over 64 simultaneous channels that it attempts to play, but it could cause other oddities if not set correctly.
The question of whether the Audigy 2ZS (or any other external sound card for that matter) is better than a built-in chip is this. With very very few exceptions, almost all manufacturers of motherboards will use the least expensive chipset they can get away with. That, coupled with the fact that the chipset is physically very close to other electrical circuits, leads to much lower sound quality. Yes the signal is digital up to a certain point, but at some point it must be converted into an analog signal, and at that point, the quality of the sound is greatly affected by the surrounding signals and interference. Moving the sound chips off of the very noisy (electrically speaking) motherboard is a good idea if quality sound is desired. Also, a dedicated sound board manufacturer has only one concern, and that is to sell a chipset that creates a quality sound. You get what you pay for, so they will provide the best quality chipset that the consumer demands. Thus the onboard chipset will be vastly inferior to a dedicated sound board.
I haven't researched what DAC (digital to audio converter) chip the Realtek ALC 1200 uses, but I'd bet it's not very good. The DAC is the main component of concern where sound quality is a factor, as it is responsible for all of the digital to analog conversions.
The easiest, and most reliable way to test your card vs onboard chipset is to remove the card, and enable the onboard audio in the BIOS. Some motherboards are notoriously stubborn about not allowing the OS to control the onboard audio, besides, you will easily eliminate any question about interference.
Edited by Latharion on 7/31/2010 9:37 PM PDT