The audio pathways in my home theater are all digital. I have HDMI cables from a PS3, a HTPC, and a satellite box running into my RCA 42" LCD TV (L42FHD37).
The RCA TV has a TOSLINK digital audio out, so I run a S/PDIF cable to an RCA RX-7000 home theater receiver.
I've noticed that the digital audio, as it passes through the RCA TV, loses its encoding (whether it be Dolby Digital, DTS, whatever). This has made me wonder what's going on in the TV as the audio passes through and is switched from the HDMI digital audio to TOSLINK digital. Shouldn't this be a purely digital pass-through, with the digital audio being unaltered? Why is the encoding being stripped? Surely the TV isn't converting digital-to-analog and then analog-to-digital...
This is not a huge deal to me since the receiver just powers two big JBL S310s, and I wouldn't notice much difference with fancy audio encoding anyway.
So everything sounds good, but I'd like to know that all the digital-to-analog conversion is happening in the receiver. I can't find anything on-line about this TV that's nearly technical enough to answer this question.
Any thoughts?