It turns out a simple call to the manufacture answered this.
You setup through the on screen interface inputs you want.
So you need to have set the correct digital audio input (coax 1, coax 2, opt 1 or opt 2) for that hdmi input.
Now exit the on-screen menu... and start using the device. (You will not have any audio yet).
Then when you select device you press the "4" button on the numeric keypad on my VSX-1127-K remote (source sel). You should see the screen on the amp scroll through auto, analog, digital and HDMI each time you press the button. It is selecting the audio sources that you picked in the on-screen menu for that input. (If your device is not scrolling through modes on the amp little screen press the press the receiver button under the option button on the remote. Then go back to source sel button and now it should be working.)
When you select digital input you should get the audio to start working.