I have an ALC889 - ATH AD700s.- they cost me $120us back in 2011.
Anyway, my bro has similar onboard sound (realtek, doesn't use any audio utilities/software - just the drivers) and a $40 pair of headphones. http://www.amazon.com/Surround-Gaming-Headset-Headphone-Retractable-Vibration/dp/B00IZ95BSE
When I game wearing his headphones the quality of sound is certainly not as good, BUT, I feel so much more involved in the game I'm playing as it provides a great atmosphere. The sound is truly surround and is somehow just very engaging (sorry for sounding so vague).
I always thought 7.1 headphones were just a lame gimmick....
OH, and his headphones vibrate at times - it sounds silly but I actually like this feature. Still, 99% of gamers headsets don't vibrate so I'm fine with that too.
Any suggestions on what I can do? Budget: $150-300us