Yes, I can hear sound when I hook up headphones directly to the VRM Box, take away the S/PDIF cable, and set the VRM Box as playback in Windows 7.
I find the sound coming that way a little lower in quality - I suppose that is to be expected? I think the sound quality even when it was working via S/PDIF was not that great - the sound to my headphones direct from my Ultralite sounded much better - or maybe I'm just used to that sound ... ??