More information. I continued my research.

It looks like the issue is the 'default' sound card was switched from my
Asus Xonar D2 to the HDMI video card. and I cannot switch it back. I see
this in Pulse Audio Manager. it shows the Cypress HDMI Radeon 5800 as
the default device and the CMI8788 Oxygen HD Audio as secondary.

More confusing and confounding is the Sounds Settings Panel of Unity in
Ubuntu 12.04 shows ONLY the CMI8788 device. It shows two choices. Analog
Audio or Digital S/PDIF. I have the fibreglass S/PDIF cable plugged in
to the OUT Digital of the sound card and into the CD digital of my
stereo.

This has been working since Ubuntu 11.04. I don't remember when I
upgraded to 12.04 but it has been more than a month.

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https://bugs.launchpad.net/bugs/1014485

Title:
  CMI8788 worked yesterday, then Update Mgr recommended, no sound after
  that

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