I searched a lot and I have settled to the idea that it’s not Windows 10 to blame, it’s not MC26, it’s the Samsung TV that does not support DTS any more. I cannot bypass the TV because my laptop has no optical output, so I have to use the splitter. In theory, the Samsung should not affect the audio from the splitter to the amp but it seems it does.
So I ended up on the following setup on MC26 that enables DD on the amp, no matter what the source codec: Audio device is Samsung WASAPI, bitstreaming is none and DSP & output format settings are as shown in the attachment.
My question is, is my setup correct? To my understanding, MC26 converts ALL stereo, DD & DTS variants to DD 5.1, right? Am I loosing sound quality from this conversion? Plus, I still have the problem of stereo sources being audible from just the FL & FR speakers, the amp cannot convert them to "virtual surround" Dolby PL IIx.
Boss Hogg, there are several misconceptions in your analysis.
First, in theory, the Samsung WILL affect the audio, because the Samsung controls the HDMI handshaking. If the Samsung doesn't support DTS, DTS will not be allowed by the handshaking. The capabilities of your receiver are irrelevant, because it cannot participate in the handshake because it is on TOSLINK.
Toslink supports a maximum of 2-channel PCM audio; for anything more than that, you must move to a compressed format, like Dolby Digital. So converting everything to PCM in MC won't work. That idea is not correct. There is insufficient bandwidth on the Toslink connection to allow 5-channel PCM audio, so MC would have to downmix 5-channel content to 2-channel, and then you lose the surround placement. That's bad. That's what you get if you select output encoding as none and channels=2 in MC. That's not a good solution.
You ARE losing audio quality with the method you arrived at, because converting everything to Dolby Digital is lossy. I don't know if your ears can hear it, but mathematically, the sound is degraded.
The best thing you could do is replace your receiver with something that has an HDMI input. Then you run from the PC to the receiver via HDMI (no splitter), and then HDMI the video from the receiver back to the Samsung. That would solve all your problems.
Short of that, your current solution is still sub-optimal.
The best thing you could do without replacing equipment is set up zones, and use ZoneSwitch to auto select zones based on the material content.
In one zone, for 2-channel audio, you leave the audio unmolested as 2-channel PCM. This will maintain audio quality, and allow your receiver to apply virtual surround environments.
In the second zone, for multi-channel content, you convert everything to Dolby Digital. For DTS this will still be lossy and degrade the sound somewhat, but it's better than no sound at all from DTS. And by not routing PCM through this zone, your regular audio will not be degraded.
You can google "JRiver zoneswitch" for more information on how to do that. It's not trivial, but neither is it extremely difficult.