IMHO- Not fixable with HDMI 1.1 = HK 354 would work!
Overview sales blurb:
"AVR 347
7.1-Channel A/V Receiver With HDMI™ Switching and Audio/Video Processing
385W: 55 watts x 7 (All channels operating at full-rated power), THD <0.07%, 20Hz - 20kHz into 8 ohms
665W: 95 watts x 7, THD <0.07%, @1kHz into 8ohms
Picture this! The AVR 347 not only includes a host of powerful features such as DCDi® by Faroudja video processing, Simplay HD™-verified HDMI™ 1.1 connectivity with full audio processing and EzSet/EQ™ technology – it uses a colorful user interface to make system setup and operation easier than ever. Add full multiroom capability with A-BUS® connectivity and you have pure Harman Kardon® sound everywhere in the house."
Page 7 says:
Simplay HD™-verified HDMI™ 1 and 2 with audio/video processing,
1080p pass-through and repeater for increased cable lengths without
signal degradation "
However, apparently the HK 347 was built in April 2007 before the HDMI 1.3 spec was finalized and therefore even though they state they pass audio/video, I don't think they can adherring to HDMI 1.3 standards.
Also from your manual on page 20:
NOTE: Since the AVR 347 is capable of processing the audio
and video portions of most HDMI signals, if your video display
device has an HDMI input, you may make a single HDMI
connection from your HDMI 1.1-or-higher source device (such
as a DVD player) to the AVR. In that case, no separate digital
audio connection is required. Make sure to turn the volume on
your television all the way off.
IMHO Not fixable! SORRY. However, you can connect separate audio cables and you are all set.
Look at the specs on the HK AVR 354 (May 2008) it supports HMDI 1.3a and would work! If there is anyway you can trade-in or return you 347 that is what I would do