"ARC can convey Dolby Digital, DTS, and PCM, but none of the advanced codecs, such as Dolby Digital Plus, Dolby TrueHD, or DTS-HD." I am not 100% sure about DD+ getting down converted to DD.
IN other words ARC is not a true 'pass thru' feature.
ARC was designed to get audio from an internal turner (OTA antenna) or app running on the TV to be pushed 'upstream' thru the HDMI cable that is connected to a A/V receiver that also supports ARC. It is up to the manufacturers as to the level of audio support for for audio coming from the non ARC ports (HDMI1 and HDMI3). It seems that most manufactures will not pass thru but down convert audio coming from the non ARC port(s).
If you want to get full audio codec support for your XBox then plug your XBox HDMI cable into one of the 2 HDMI input ports on the back your bluray player.