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I'm having some multichannel audio problems on my Mid-2010 Mac mini running 10.8.4 and Frodo 12.2.

My setup is unfortunately complicated: the Mac mini is connected to an Octava HDMXA71 HDMI matrix. One output of the matrix is goes to a Denon AVR3310, which in turn is connected to an Epson projector. The other output of the matrix goes to an Octava HD41ARC, which is then connected to a Panasonic TV. The HD41ARC strips off the audio from the HDMI and sends it to a Sonos Playbar over Toslink. Because the Playbar only supports 2-channel PCM, 2-channel Dolby Digital and 5.1 Dolby Digital, the HD41ARC is configured to set that as the audio portion of the EDID. I can confirm that this works by running plugging a Playstation 3 into another of the matrix's ports and running the audio setup when the TV is on. The PS3 shows just the three audio options I would expect, PCM 2.0, DD 2.0 and DD 5.1.

My problem is getting non-DD multichannel sound to the Sonos. Any file that is DD5.1 works fine, the Playbar sees it as 5.1 and everything is happy.

Non-DD multichannel sources (old Xvids with MP3 audio or anything with DTS audio) gets down mixed to 2-channel.

Audio MIDI Setup on the Mac looks correct: in addition to the standard choices for 2 channels at 24, 20 or 16 bits at 48k, 44.1k or 32k, and also includes the option for encoded audio, which I’m guessing is the DD5.1.

In XBMC, to get any audio on non-DD 5.1 sources, I need to set:

Audio Output: Optical/Coax
Speaker Config: 5.1
Boost: off
Output stereo to all: off
DD capable: on
DTS capable: off
Multichannel PCM: off
Audio output device: HDMI

What I think is happening is because “Audio Output” is set to Optical/Coax, after the DTS or MP3 is decoded to PCM internally by XBMC, the additional channels are getting dropped because Optical/Coax only supports 2-channel PCM. This two channel PCM is then getting output over HDMI and that’s why I only have two channels.

If I switch “Audio Output” to HDMI, I get no sound from DTS/MP3. What I think is happening here is the surround channels don’t get truncated internally like above, but all the audio is getting killed because I don’t support multichannel PCM.

Does this seem correct to everyone? Is there a way to force XBMC to encode all output to AC3 so I can get audio with this setup from all filetypes?
Not ATM. Reencoding from DTS to AC3 was supported in Eden (so you could give that a try). The new audio engine doesn't support it yet (no ETA we are out of Audio Engine developers since months now ...).

Beside that - your setup is a non-funny mess imo Wink

Problem is the toslink. It will limit your overall audio chain to 2 channels. As you noticed only 2 pcm channels or 5.1 encoded stuff (either ac3 or dts) can be transported over that. So you are screwed when your receiver is not able to handle DTS for now.
Is DTS -> AC3 reencoding not supported just on MacOS or is it cross platform issue?
IIRC it is supported on softae only (which would be windows or linux) - though i don't know if it really works in current code.