You have it correct, given your connection diagram.
Audio from the Bluray player to the receiver uses standard HDMI audio, which has enough bandwidth to support TrueHD and dts-HD audio.
Audio from the TV to the receiver uses the HDMI Audio Return Channel (ARC). ARC has the same bandwidth limitations as Toslink/optical, so it cannot pass lossless audio such as TrueHD & dts-HD.
Another way to think of it is whether the audio is going in the same direction as the video.
Video flows from the blu-ray player to the receiver. Audio goes in the same direction, so it uses standard HDMI audio.
Video flows from the receiver to the TV. Audio from the TV to the receiver flows in the reverse direction, so it has to use the Audio Return Channel.
eARC raises the bandwidth limits of original ARC, and can support TrueHD and dts-HD. However, both devices must support eARC. The TV may be able to send lossless audio, but an older receiver is still limited to ARC, so it cannot receive the lossless audio stream.
The HDMI handshake between the two devices will let them know what each other can support. So, if it works correctly, the TV will know the receiver is limited to ARC and will not try and send lossless audio.
Thank you all for breaking this down, now my question arises is there a way that i can connect
TV (eARC) to reciever ( any input port) and then plug my Receiver output port back to the TV, so say i can have the eARC (HDMI 2) sending the audio to a DVD port in my reciever but watch the video on another port (HDMI 1)?
i know this may come out a dumb question, but i am keen to learn the technicalites.
In addition to what you have explained, Plex has to allow the transfer of audio using eARC. That is, if Plex does not use the eARC feature, it will not output high definition audio.
In theory, the same behavior would apply as with ARC. If the TV is not compatible with Dolby True HD, the TV itself would lower it to Dolby Digital (AC3) without the need for transcoding by Plex.
The questions about plex support, I suspect are irrelevant.
Plex supports whatever the tv/hdmi tells it.
If the tv doesn’t support truehd, but is connected via e-arc to an e-arc receiver with truehd, then plex should simply pass it on through to the receiver (via the tv).
If for some reason the tv over-rides or ignores the capabilities of the receiver, then plex has no idea and just plays what the tv says it can play.
These are still the extremely early days of e-arc, and both TV and RECEIVER and the HDMI cables need to all support support the same feature (e-arc).
The last post on the above link suggests something may have improved, but to be honest, i’m not entirely sure what it’s on about. It seems to be talking about a Blu-ray player and whether linking direct to the TV of via an amp… it doesn’t mention using in built apps.