[jjhtpc]

IMHO this is a very strange setup. XBMC is not designed to be a headless music player. Why not use logitechmediaserver and install squeeze player (android software) on the FTV?

Or buy a squeezebox, which is actually designed to do what you want :-)

Well my music library lives on a Solaris box (a ZFS server) and logitech media server doesn't work on that OS. So that's why I don't use squeezebox.
Besides, I've been using XBMC as a headless music streamer for years, albeit running on a PC. It reads the music files over the network via SMB, no special server software needed. It works fine headless as long as you've got a smartphone or tablet to control it from.

I'm not sure if this will work for you if you have the same issue I do.
I am unable to get optical audio out to work if I do not have an HDMI
display connected. You can refer to my previous post on how I am
not able to get optical audio out to work with a DVI monitor (using an
HDMI to DVI adapter), but I also figured out that it would fail with no
display connected. So, in short, no HDMI display connected, no audio
out through optical.

Yes fire is an hdcp compliant device, it requires a handshake at least at start up. It is a video device with an hdmi port and that is why it was built this way. There are no other video ports on this device. There are some 3rd party devices that can be attached that will simulate the handshake. An example of a device that can do this is a HDMI splitter.

I hope this helps.