Computer Rig Help

[aeromonte]

I am confused a bit and some help/wisdom would be appreciated much.

I have a Creative Audigy 2 ZS Platinum (with breakout box) sound card. I just purchased 2 Behringer MS40 computer/multimedia monitors and I am using Native Instruments Guitar Rig and Amplitube. I am just looking for some more knowledge on all of this.

My Creative box/instructions show to connect the guitar to front panel line in 2 (which is 1/4"), but it sounds better connecting to Line in 1 (1/4" mic input) - which has a line volume, when turned up is like turning up gain on an amp...
Anyone know why it sounds better and why creative would tell you to hook up a guitar to line in 2?

What is the deal with balanced/unbalanced inputs/outputs? Does a guitar need to be at line level when going into a sound card? Do I need a preamp of some sort?
I have digital inputs on my new Behringer monitors, should I go digital coax from soundcard to monitors? Is this better than analog? Is analog balanced?

Thanks to anyone who can help!!