Yes, on TVs with just ARC, DTS HDMA and Dolby TrueHD would be reduced to their lossy core when outputting externally connected device audio signals to a soundbar/receiver. What are the specs of that switch? Have you tried connecting the Sony directly to the soundbar on its own to rule out the switch box?
The switch is certified for up to 18Gbps 4k / HDR HDCP 2.2 HDMI 2.0. Keep in mind it's NON 4K content that triggers the strange behavior when the player toggles frame rates of 1080p video, and switching the Player to 4k Output, or disabling 24p on BD/UHD fixes it. If the switch was the problem, it would be having issues with 4K content, because everything today is at least HDMI 1.4. Based on what I've heard from others to varying degrees, the player can have dropout issues. It's possible the way the UBP-X700 handles resolution changes, etc might affect the handshake. By the way, forcing 4K output resolution, or 4K upscaling really isn't going to change how things look will it? Even though the player reports 1080p for blu-ray, or upscaled DVD, the TV is still upscaling to 4k. So forcing 4k all the time seems like it would save work on the upscaling. Just a thought
By the way, I have experience and a degree in broadcast TV. However, I finished my training in 2010 which is when digital was just taking over, so everything I've learned since has pretty much been independent through forums, and reading and trial and error. Also talking to people who have more experience than myself.
Heck when 4k first came out, I thought initially it was just going to be another gimmick or niche item like 3D was. So, I'm actually surprised it's actually taken off the way it has. The problem I see from my own experience is there are too many specs and standard that in my opinion that were rushed, and nothing plays well together, at least it's very hit or miss.
I will say this, I did try separating the audio and video connections again in trying to solve the problem. It worked, but wasn't reliable as the sound bar kept toggling between HDMI in and HDRM ARC, so it was much easier just to change the player settings so it would stay set to HDMI in, so the full audio quality was available. So, that's where I'm at, and how I came to the conclusions I did on which fix to use.