I have been fighting this issue for a long long time. For the most part I have just ignored it, but I think it's time to address it.
I have a HTPC running Win 7 64 bit. I just purchased a EVGA NVIDIA 1gb 8400gs video card intending to use the hdmi out.
I got it installed and like my previous video card, the ATI 4450 I got the stupid "Video Error Files needed to display video are not installed or not working"
I read through a lot of posts, and found by setting my Windows Audio to stereo and WMC to 7.1 I would get past that error and the movies would all play.
So I launch WMC and standard DVDs play great.
When I try to play a blueray, for example "The Hobit" I had to go into PowerDVD 11 and set the audio to HDMI out and output mode to non-decoded to get any audio.
Only problem is, I only get 5.1 audio. The movie was ripped with the DTS 7.1 audio sounds track. I know i'm only getting 5.1 because the front of the receiver shows which speakers are active.
Here is the information from the ripped movie.
I'm outputting to a Onkyo TX-NX3007 receiver.
If I go into sound in the control panels on the HTPC and select 7.1, and perform a test, I get audio out of all 7.1 speakers. But I can't keep that because I then get the stupid video error files issue.
This has been driving me crazy for like 4 years.