There are 2 places where you can change between stereo and 7.1 on this headset.

Place 1: the driver. The driver can be changed between stereo and 7.1 by moving the switch on the back of the headset.

Place 2: Windows sound settings. In Windows Vista/7, this can be changed between stereo and 7.1 by right-clicking the speaker icon in the tasktray -> Playback devices -> Right-click the G35 headset -> Configure Speakers. In the resulting dialog box, click next and then set the checkboxes based on what you want the Windows audio setting to be:

For Windows to be set to stereo: uncheck "Center, Subwoofer, Side pair, and Rear pair". Click next. Check "Front left and right". Click Next -> Finish.

For Windows to be set to 7.1: check "Center, Subwoofer, Side pair, and Rear pair". Click next. Uncheck "Front left and right". Click Next -> Finish.

You  have to refresh the Youtube video you're on.