I'm having the exact same problem as the OP. I just replaced my Yahama receiver with a Denon 1712 for Audyssey MultiEQ XT. ARC worked on my Yamaha just fine but when I hooked up my Denon, turned ARC function on and no sounds came out. Everything else worked just fine, including stand-by pass through. I'm not sure if I just had bad luck with a defective unit or there's some compatibility between my Panasonic Plasma with Denon receiver. Anybody else has ARC problems with Denon receiver and Panasonic TV? If it's actually compatibility issue, I shouldn't waste my time to exchange it and just get an optical cable. I can live with that. But if my unit is defective, I should ask for an exchange.