With DTS there are a few ways to go. S/PDIF pass-through, which sends the stream, untouched, out to an external decoder. Or, decode. Typically this means using a DTS codec to decode the DTS stream into PCM and send it to a multi-channel sound card.
If using S/PDIF then many of the MC features can not work! DTS (and AC3) is an encoded digital stream, and can't be mixed, without first being decoded, which MC can’t and shouldn’t do. This is not a fault of MC, it's the nature of encoded digital streams. If any of the DSP features are enabled, however, then MC does a very bad thing, it treats the encoded digital stream as if it were PCM and sends it to the output... duh! To make S/PDIF pass-through work you MUST disable DSP features and realize that visualizations will not work either. Also, you must disable things like cross-fades between songs... MC cannot mix DTS or AC3 streams, but it will try and bad things WILL happen. Unfortunately, you need to KNOW WHAT YOU ARE DOING. MC will do totally invalid things, completely without warning, if you tell it to!
Even if you get all of this right there is still another problem. It is quite possible, and useful, to have multiple codecs (of a given type) on your system. If you’re like me, you do, and you have built graphs that you pass to your other applications so that each one uses the correct graph. However, I have yet to find a way to pass MC a graph, so it simply relies on the OS and uses whatever default graph it gets based on codec merit.
I am here today because of this very fact. While I had AC3 and DTS working fine for a few months, it is now completely broken and MC does nothing but throw exceptions. I am certain this is because additional codecs have been added to the system to deal with additional media types, which has changed the order of precedence. Beware of this when accepting advice from others. Because of the variations in codecs on each system, and possible tweaks to their merits, what works for one person could not work for someone else, and you can waste A LOT of time following advise on SEEMINGLY identical systems. Its not a matter of just having the right codec, its also a matter of not having incorrect ones that have higher merit and that get picked first.
I was hoping to see that MC now had the ability to correctly handle DTS and AC3 but it looks like its still an afterthought that can only work if you can afford to dedicate hardware to it and install only the codecs needed to make it work. This is completely impractical! This is disappointing and actually very surprising that such a sophisticated application is so unsophisticated when it comes to something so germane to proper operation of audio streams. You can’t just close your eyes and pray the OS will give you something useful… and do so consistently!