just to be sure we're on the same page you have the WDTV Live HD Media Player WDBAAN0000NBK-NESN?
In both cases where you get 5.1 from the optical and 2.1 from the HDMI only connection, have you gone to the WDTV Live menu and set the "Audio Settings > Sound" to "Stereo" or "Bitstream/Digital"?
I want it so that I can only use TV stereo directly to TV via HDMI and not have to turn on the receiver.
And if I want to start listening to digital 5.1 on the WDTV Live, I can connect the optical TOSlink cable from the WDTV Live to the receiver while the WDTV Live is still connected directly to the TV via HDMI. In this case, will the 1712 receiver be able to just only output optical sound without an assigned input HDMI source?
Yes, that is what I have.
I have never went straight to the TV ever, but for you I plugged the HDMI from the WD straight to the TV, and both sound and Video were excellent.
Keep in mind my use of the WD may be different than yours. I burn DVDs, both SD and HD movies to 4 2TB drives which are plugged into a docking station (one at a time), which is then plugged into the WD. I got tried of burning to DVD's, since I have more than 2000 of them.
HTH and best regards