After doing a bit of reading I upgraded to PDVD8. I was hoping for better sound and picture. I can’t see any difference in the picture and the audio seems maybe better. I can now play Across the Universe and the audio dropouts seem to be gone from Ratatouille and others. I was hoping that the SPDIF would work now but for me it still crashes PDVD when selected. I wanted to use it because while I am using the digital output on my Creative X-Fi card (so my Denon AVR-5803 can do the decoding) the channel test on the Avia DVD are messed up. It sends the rear channels out the front. The digital output from my DVD player to the receiver works fine in the regard. I was hoping that the SPDIF selection in PDVD would fix the issue but I can’t use it.
Fun with Audio:
I have had the Creative 8 channel analog cable for some time but it was not long enough so I had not used it until now. I wanted to see if it would work. I set the number of speakers in the Creative control panel to 7.1 and its tests worked fine for all speakers except I really have a 6.1 setup speaker wise. I only have one rear surround speaker but I’ve set it up in the receiver and the manual tells you to connect it to the Left Rear if you only have one. It looks like it works fine if the receiver is doing the decoding but using the 8 analog inputs the Right Rear audio is just lost. I used a Y adapter to combine the two rear analog channels. I’m thinking that may make it a little louder but at least the tests vocals for the RR and LR both com out the one rear surround.
Now onto PDVD. It is also set to 8 channels and while I did not try the Avia DVD I did try the Audio setup test on the Blu-ray Ratatouille. There is a low level hum coming from all the speakers with using the 8 channel analog cable but I have to be real close and the movie must be paused. This is not there when using the digital output. All the channels work but it has a test for a single Rear surround and it sends the sound test through both the side surrounds. There is a note on the screen stating that it will do this if you do not have a rear speaker. ???
All that being said, I think the sound is a bit better get the down sampled True-HD through the 8 channel analog cable even with the extra humming noise. The side surrounds are notably better using the analog outputs when compared to the Digital output of the X-Fi. They sound cleaner and more accurate. Like the correct sounds are being sent to the side surrounds. In Ratatouille, early on when the old lady turns on the light and starts shooting up the place, the click sound is clearly defined and is without question coming from the Left Side surround speaker. When I switch to the digital output the click is not as clear and sounds more like its coming from the Left Front.
I guess you're using XP? Do you have any filters for AC3 or DTS audio such as AC3 Filter? If so, try disabling them for AC3 or DTS and try again. I had a problem with AC3 Filter interfering with S/PDIF output of my DVR files when played with PowerDVD.
About the hum, it might just be the sound card itself with the internal interference of the PC, but if you can try better shielded cables. It could reduce noise a bit, depending on the length of your actual cables, and where they're going through.
Another possibility is to just leave PowerDVD in 8-channel mode and then let your card encode it to AC3 or DTS via DD Live or DTS Connect, but you'll probably need a new soundcard to do that. Look up "Sondigo Callisto", and that's exactly what you'll get, no more (except for headphone out), no less. I love my Callisto, but it seems it's being discontinued.
Another choice would be to pick up a C-Media based card (Asus Xonar series, HT Claro, etc.). I don't recommend Creative cards for HTPC. They don't have any Dolby or DTS features, and their Creative counterparts are just plain crappy from what I've tried (specifically CMSS-3D vs. Dolby Headphone).