[noggin]

Last night, I played a Dolby TrueHD video file. My AVR played it with no issues and it sounded great! AVR also showed on its display the red, Dolby D+ icon. However, when changing the volume (up or down) the audio drops for a second and then resumes.  ¯\_(ツ)_/¯

I've been doing some reading and I believe I may have found why this is happening. The C9 is eARC, but my AVR isn't. The file I played was TrueHD, yet it played as Dolby D+. Could this be the reason of this sound dropout when changing volume? My C9's eARC (HDMI#2) is connected to my AVR's MAIN OUT (not eARC). Considering that I'm not using the AVR to process any video, am I better off connecting the C9's eARC HDMI cable to any of my AVR's HDMI inputs instead of the MAIN OUT? This way, the full HD audio is passed.   

That's not how ARC and eARC work. They don't send the audio in the same way as HDMI sources do, so connecting the eARC input from your TV into an HDMI input on your AVR (rather than an ARC-capable HDMI output) won't work.  (You are connecting two inputs together)  

HDMI sources send the audio within the video stream, on the video data pins - using the spaces in horizontal and vertical blanking around the video to carry audio packets. ARC and eARC use separate pins to carry audio in the reverse direction.  ARC and eARC inputs on TVs are 'special' as they send TV audio back down the cable 'the wrong way' using a separate audio standard and channel specifically for reverse audio carriage (i.e. they are HDMI inputs BUT TV Audio outputs).  eARC and ARC outputs on AVRs are similarly 'special' as they are HDMI Video (and in some cases Audio) outputs BUT ARC/eARC audio inputs as well to accept ARC/eARC audio from the TV.

The only way you'll get HD Audio from your N2 is :

1. Connect it to an HDMI input on your AVR and watch the N2 via the AVR. (However if your AVR doesn't support HDMI 2.0 you'll be limited to HDMI 1.4 video - so no 2160p50/60, no HDR I think etc.)
2. Replace your AVR with one that supports eARC (or just HDMI 2.0 to support the above, if your current one doesn't)
3. Invest in an HD Audio extractor (these are non-trivial and not as cheap as SPDIF audio extractors) which will have an HDMI 2.0 input for your N2, and an HDMI 2.0 output for your TV and and HDMI 1.4 output that carries video (black or downscaled HD) and HD Audio to feed your AVR. (HD Fury make one, but there are cheaper ones I suspect)