Originally Posted by _eternal
Either way, coax might be better because the optical cable would have to be bent a bit, but I'm wondering if converting the signal and using coax into the receiver would make it worse, since looking into getter a new AVR that supports HDMI audio is also an option (although not an ideal one).
It's a digital signal. If the conversion affected it in any way, it'd be a complete dropout of sound, not a gradual degradation. Converting shouldn't affect if if the converter box is working properly.
Also not sure of the subtleties of how 5.1 even works, but from the sound of it, both coax and optical will only output 5.1 if the source is encoded in that Dolby format? So basically most new movies and games, but nothing else?
5.1 soundtracks have been around since the mid-90s, first appearing for the home on laserdisc. It's since migrated to DVD, Blu-ray, games, broadcast TV, cable TV, sat TV, and internet streaming. It's hard not finding a movie, game or HD TV show that doesn't have 5.1 or better. It's not just Dolby, either. DTS (Digital Theater Sound) is another company with 5.1 and better soundtracks (better being 6.1 DTS-ES and 7.1 DTS-HD codecs.)
If the source isn't encoded in 5.1, your receiver can matrix a stereo source out to 5.1, with varying results.