sorry - actually the SPS66 doesn't have SPDIF, but it has "digital" which I assume means ADAT or similar. just make sure your playback and recording masters are the 1/2 inputs and outputs instead of something that says "digital" or ADAT or "optical"
WRT drivers and MS update: you can try that, I'm not sure if that will help or not.
you might want to try a different firewire port. it's possible that this one is losing power intermittently causing an unload/reload of the drivers when windows "loses" it and finds it again.