Fixed my slow down issues, very happy about that.  I have the sound cutting out rarely but to be frank, I just don't care as long as it's playable.

Try and get a dedicated sound card (usually 10-50 quid) i am looking to upgrade my old 1995 sound card soon to a Xi-Fi one. Try disabling the onboard sound in BIOS and see if it speeds the game up

Have you tried the creative on low quality sound?

Just got the game and when things get hectic the game starts to lag really badly even on lowest settings. Looked around, found this thread and tried turning of sound. It worked like a charm and the game runs perfectly on the higher settings.

Updated my sounddrivers, easy, but no effect.

Wanted to update my motherboard but I am a bit unsure to what this exactly entails. Been looking around and it seems to me that it means flashing your bios (or something that sounds quite dangerous). I have a asus p5gd2-x motherboard and before actually finding out how to do this without blowing up my pc i'dd like to ask if that procedure is really what the devs mean. Seeing as I never had to go through so much trouble for a single game it just seems a bit much...

What i'dd really like to hear is that this problem has been fixed by now but I simply haven't found the right thread

Going to keep this short, as I have only 6 fingers to type with at the moment.  My story goes like this:

Playing the game, having a good time.  Suddenly, I realize its choppy as hell.  Turn down settings, no benefit.  Keep playing, thinking this can't be right.  Running Athlon 64 X2 at about 3.0, GeForce 9800GT, X-Fi ExtremeGamer, 4Gb RAM, XP32.

Came to the forums, saw the thread about sound.  First tried running with /nosound, ran beautifully with all the settings up.  Got lonely in all the silence, opened up Creative control panel.  Noticed that it was set on 4.1, set it back to 2.1.  Ran game with sound, and it ran great, even with reverb.  Seems to have fixed it for me.  Will keep playing to see.

Messed with it more, I think I was mistaken.  When the activity in game is low, it's hard to tell a difference, but when the game picks up, I run much better with /nosound.  Hope to see this fixed.

OK this is what I did to fix my problem and the lag was unplayable before I did it.

I am Turning off Skype and Vent and start the game (would recommend to try to turn off all programs that uses the soundcard). I tab out when game is up and running and in multiplayer lobby and start vent since I need it but this is optional and nothing I have to do for the game to work.

Reverb is off and Sound qual set to High. Hardware sound acceleration is on max.

Game works with all grafic settings on high with no stutterings and I can host games.

Using a Creative X-FI Gamer on a Asus A8N32SLI-Delux mobo with WinXP and 2GB ram. Asus 9800GT OC.

X-FI mode set to GAME Mode.

No problem for me anymore since I started doing this. Hope this helps anyone else.

// Cyphrs

I just got the game yesterday and sadly have been affected by this sound issue as well.  I have 3 systems I have tried the game on, 2 run it perfectly, but one is pretty terrible.  I get stuttering sound effects (regardless of the sound quality or reverb settings) and once in a game the framerate starts out ok but then quickly drops to maybe 5-8 frames a second.  If I put the /nosound switch on the game shortcut everything works fine (other than sound of course).  I can play all the way through a game without issue, usually keeping over 50FPS with the graphics settings on medium.

The system with the problem is my oldest computer.  It's a homebuilt Athlon 64 3500+ single core, MSI RX480 Neo2-F mobo, 2 gigs of ram, 9800 GTX, and Creative Audigy ZS2 gamer running 32 bit XP SP3.  It's not the fastest system but usually does a respectable job with most games if I turn the graphics quality down a bit.  The system also has an integrated Realtek AC97 soundcard but I have the same problem when I try to use it.

One of my correctly working systems is a Dell XPS1530, Core 2 duo T9500 (2.6GHz), 4 gigs of ram, 8600M GT (overclocked a good bit), and integrated Intel HD audio running 32 bit Windows 7 build 7000.  I can run the game at 1650x1080 with everything but AA and shadows turned all the way up and I don't have any issues in game with slowdown other than the occasional hiccup when a ton of stuff is going on.

The other system is a homebuilt Core 2 duo system with 4 gigs of ram and a 9800GT with the same Intel integrated HD audio running 32 bit XP SP3.  I don't remember the exact specs of the proc and mobo (and I can't check at the moment as my brother is currently bashing the crap out of things with Rook) but it plays the game flawlessly with everything turned all the way up.  I don't think I've seen it slow down at all yet.

So both of my Intel proc/intel HD audio systems run great.  My AMD/Creative system pukes when sound is enabled.  This makes me sad as my big comfy gaming chair is at the desk with the misbehaving system.  I just got through sending my DXdiag and Demigodlog to Stardock as requested.  Hopefully they will come up with a fix at some point.

@Therlun - Renaming the movies folder didn't have any effect unfortunately  I did find that changing my speaker settings from quadraphonic to stereo helped a bit but not enough to actually play well.  It probably doubled my framerate though by just doing that but I still get stuttering sound.

[EDIT]

I just tried this and it did help. Along with setting my speaker settings to stereo it makes the game playable.  I hover around 20 FPS constantly with it set like this with high quality and reverb on.  The sound is a bit laggy though.  I tried it on low quality with no reverb and it's actually pretty playable.  Staying around 30 FPS even after I turned my video settings up to 1650x1080 and medium quality.  It still doesn't run as good as it does with /nosound but we are getting somewhere

Since 1.1, my games start a sim 5-6, and end up -1 to -2 in 4v4s.  That's really bad.  Lowering all settings to Low/off does nothing.  I tried /nosound, and it ran 8-9 at the start of the game, 2-3 durring the end.  That's a huge difference!  But playing with no sound is pretty awful.  I will try the above fix to see if it help.

Has there be ANY word from SD or GPGs about this???

I had the same problem too. Going out and buying a new sound card didn't solve matters. In fact, it seemed as if my shiny new Creative sound card actually functioned worse than the onboard Realtek sound thingy I was using before.

I finally managed to solve it by replacing the binkw32.dll file in the /bin directory of where you installed the game. The game uses version 1.9 (it actually has some additional numbers, but that doesn't matter), which apparently caused problems on my system. (The RAD game tools frequently cause problems on some systems; for example, the Granny sound system causes the so-called "rubber-banding" effect in Titan Quest.)

Bink videos are used for the introductory movies, as well as for your character portrait, which explains why the game might stutter during actual gameplay, as your character's portrait is always shown. If you want to be sure that the movies are causing the problem, try running the game with the command line switch:

/nomovie

See if that makes a difference if you are unsure about what is causing the problem.

Anyway, to solve the problem, I searched the directories of other games that I had installed and managed to find an older version of the binkw32.dll file. I think I ended up using the binkw32.dll file from Star Wars: Battlefront II or something. Some experimentation shows that you have to use version 1.8. Earlier versions won't work (I tried version 1.6 from Rise & Fall), since they don't support some of the features that Demigod apparently uses. 

Now, the game plays smooth as silk. I only get some stuttering when I select a different hero in the lobby (those movies are BIG), but I can live with it.

EDIT: note that patching the game may restore the binkw32.dll file. I noticed this when the hotifx got installed yesterday. So if you try this fix and it works, but it stops working after you patch the game, remember to replace Demigod's binkw32.dll with your older version. And while I'm at it, always remember to make a backup of any files you change or replace!

Trying it now (crosses fingers).