I have a similar setup as your. I have the SH-AC500D with the analog outputs feeding three separate stereo amplifiers. Yes, the SHACs are old, but they work well for me, especially since most of my movie library is from DVDs.
S/PDIF only supports three formats of audio: Stereo PCM, DolbyDigital-5.1 and core-DTS. This was all that was available on DVDs, so the SHACs were fine prior to Blu-Ray.
When you have your players decode to PCM, you will only get stereo down the optical pipe. The SHAC can do either of two things with that stereo signal: It can play it as stereo ("Stereo" on the display), or it can play it using Dolby pro-logic (the surround format used on VHS tapes) to simulate surround ("Surround" on the display with the "Pro Logic" indicator lit).
If the BD player sends DolbyDigital-5.1 or DTS down the pipe, then the SHAC will decode it into all six discrete channels, and either the "Digital" or "DTS" indicators will light.
Now, to this question:
Originally Posted by jamesgangnc
But what's getting sent over that SPDIF connector when I play a blu-ray disk that has DTS-HD-Master Audio? Does the blu-ray player convert that to regular DTS? I'm guessing it must since my SH-AC500D recognizes the signal as digital and as DTS.
DTS is a "layered" audio format. It starts with standard (DVD style) DTS data, which is called the DTS-core. Then additional data is added to increase the fidelity, making the audio into DTS-HD. Then a third layer of data is added to make the audio lossless, and that is DTS-HD Master-Audio. When the BD player has DTS-HD MA selected, it will send all
of the data down HDMI, but only the core
down S/PDIF. So the SHAC will receive standard DTS, and should be happy with it.
Now the reason both BD players give you so little choice with selecting audio (either decode or bitstream) is because that choice is made within the Blu-Ray disc's code, on a per-title basis. The studios typically select either DTS or Dolby to include on the disc, and you rarely have a choice. So it's easy for the BD player to select a default. Since S/PDIF only supports DD5.1 and core-DTS (besides stereo PCM), that is what the player will be sent down S/PDIF.
But now I come up short as to why you are getting drop-outs and distortion. Since you don't get those dropouts with PCM (when the BD player does the decoding) then the likely culprit is the SHAC. There could be passages that the SHAC is not decoding properly. Then again, it could be that the players aren't extracting the DTS-core or the DD5.1 properly. Here are some tests you can try:
Are the drop-outs random or are they repeatable?
Do the drop-outs happen on DD5.1, DTS or both?
Do you have the problem on all discs or just some particular disks?
By the way, Are you using optical or coax S/PDIF?
Hopefully, it's not a problem with the SHAC.