Umm...that is not how HDMI audio works at all. In fact, it works exactly how you say it doesn't. If the sources are connected to the receiver then it does, indeed, decode the audio from the HDMI connection and pass along the video to the TV. In my particular receiver, the audio stream is stripped from the data sent to the TV, I would think this is standard behavior.
ARC was intended to allow the TV to send audio back to the receiver from its inputs. In modern TVs, it can be used to send along the audio streams generated by the internal applications (e.g. a Netflix app). However, it seems this is finicky, and many people seem to have issues with it. Since they have issues with it, most resort to connecting an SPDIF connection from their TV to the receiver. This is only used so the receiver can play back the sound of the TV's internal applications.
In everything I've said above, I assume you're using the receiver as the "hub". In other words, all your devices are plugged into it, and then it's monitor output is connected to your TV. If you're not planning to have it work like this, then you'll probably be very limited to what the TV will pass through to the receiver via SPDIF (or even ARC). Most will only pass stereo and DD/DTS. None can pass the newer HD codecs through SPDIF because it doesn't have the bandwidth. I believe ARC is also limited to the same formats as SPDIF.
edit: ugh, guess I was late to the party, none of those responses were up when I started typing this, lol!
Originally Posted by CaptainSKA
Wait, so receivers pull the audio off the HDMI before passing signal to the TV? Last I had checked that was a no-go because of HDCP. Has that changed?
Also, I understand what ARC is and how it works - I was just operating under the assumption that AVRs that switched HDMI were required to use that to play the audio from the HDMI signal.
It never worked the way you thought it did. So, your grasp of HDMI/HDCP and ARC was always hazy
. Plus, ARC didn't even exist in the advent of HDMI, and by the time it did, receivers were fully able to perform HDCP handshakes and didn't need ARC to decode audio.