I connect to a Yamaha Rx v461 receiver which plays DTS files just fine but it won't handle the surround wav or flac files I through at it. Is this because it is not able to decode them correctly or some other reason? It plays only in 2 channel mode.
it's because we can't passthrough wav or flac. You need to enable Multi-PCM and this takes (modern) HDMI audio and some proper configuring (not an easy task always)
Is this the software or the receiver?
I am thinking of buying a new receiver
http://www.fynda.se/show_prod.php?prodid=4628
But I am not quite sure how the HDMI works. I'd like to move away from optical digital to the HDMI but I don't want to buy another receiver that just does HDMI passthrough to the tv. Do you know if this receiver will process the HDMI signal and play back the audio for me? My current receiver only sends the HDMI signal onwards and I still have to use a 2nd connection to play audio.