There is a difference between an on-board or integrated component and an expansion card, and software processing and hardware processing.
Software processing is when the CPU emulates a sound device and processes the sounds.
Hardware processin is when a device independent from the CPU does the job, it doesnt matter if that hardware is attached on the motherboard, or its on an expansion card.
In my motherboard, the sound chip is controlled by the south bridge but is physically separated from it. On the other hand, the onboard graphics chip is integrated on the north bridge.
My sound card has VERY GOOD QUALITY. Right now i use a stereo 2.1 (but the jacks can be re-tasked to use a three-jack 5.1), but in DooM 3 every gunshot makes my armchair rumble!
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