I am not using any applications just connecting as a giant monitor
In order for your Mac to play any audio or video to the AVR you have to use an application. Music and video don't play themselves, applications do. In your first post, what audio were you trying to play or are you just talking about system audio sounds, beeps, dings, etc? Also, you're getting a great picture--do you mean your desktop? Have you tried playing music with iTunes or a video with an app like XBMC, Plex, VLC yet?
Click on the display icon in your menu bar...in the drop down is it your projector or AVR model being detected there?
With the system preferences and the audio midi app there is no HDMI. Option. The one thing it shows us the name of the receiver and AIR PLAY as the output option.
System Preferences > Sound > Output, and the only thing there is your AVR model and under "type" it says "Airplay?" That's interesting, when you are connected to something over HDMI, an AVR, a display, whatever, should also be listed here and under "type" it should simply say "HDMI"..as well as include any other audio output, like if you were using a USB DAC or running optical audio out to an AVR in addition to HDMI.
Do you have a different HDMI cable you can swap in and try?
You also haven't said what you "messed with" in the AudioMIDI utility. When you open AudioMIDI and look under Audio devices what do you see in the left hand column...is HDMI listed? to the right of HDMI, under the Output tab what does it say for "source?" It should have the name and model # of your AVR or display here. I don't have an Airplay capable AVR so I can't tell you if that should show up here as well, i.e. if you should see HDMI and Airplay as separate items, but I suspect that's how it would work. Anyway, describe what you're seeing here in MIDI and we'll take it from there...
If it does say HDMI in the left hand column, select it and then click on the little gear icon below it...look for "use this device for sound output" and select it.