I believe a lot of this is actually ISP related. With the same Cisco8742 and Time-Warner I get the exact opposite. HDMI is throttled at 2 channels but the Optical out is OK. And actually these CISCO's are ALL customized depending on the ISP, which is why you won't find a manual on the CISCO site.
When I follow the instructions above (which I did some time ago) it winds up gelding both the HDMI AND the SPDIF to both be basically useless. It actually sets them both to a circa 1994 protocol "Dolby Stereo" --not even Dolby Digital. There are three options on my setup---Both to "Dolby Digital", HDMI or Other--All three are useless for what I'm looking for. I get a similar problem with a T-W Samsung Cable Box so pretty sure it's T-W related. I'm better off running a straight RCA analogue Left/Right hookup and letting my AVS decode into the surround sound or "Straight Stereo" that suites me. I stream just about everything from the internet now. Sports is about the only thing I watch Broadcast in Realtime so for now I'm not going to spend much more time worrying about the Cisco. I have about 5 other devices with HDMI, all of which send a good audio.
I think in the other thread someone asked about a remote controlled Optical Switch. You can probably get 'em but since it HAS to physically switch the Optical signal it's not likely to be a trivial device. The Mechanical ones that you switch by hand, of course are trivial but not convenient. The new AVS I'm getting has 6 HDMI imputs/2 out and 2 optical inputs/0 out. Optical is not a bad way for me to connect up my sound systems between rooms in my apt. It would be nice if I could find something lots of HDMI's, Optical and Coax in and out, and even some S-Videos for legacy stuff. ONE AVS to RULE THEM ALL! Neither Yamaha nor Marantz have covered all bases no matter how much you spend.