You need to set audio settings to wasapi
Bitstreaming means that MC doesn't decode the audio embedded in a video file, but passes it along untouched. But, it still needs to be able to "pass it along" in a "language" that your sound card driver understands, so that the "sound device" can then talk to your HTR in the HDMI format that it understands. Even when bitstreaming, MC uses the Options > Audio > Audio Output Mode setting to decide what "language" to use. I wasn't aware of this myself until recently.
Event Style WASAPI would be the best, if your HDMI output device supports it correctly. Vanilla WASAPI if not.
Please Note: If exclusive mode is enabled (which it is by default), then you can't use MC while another application is using your "sound card" (in this case, your HDMI output). So, for example, if you try to play a video or audio file in MC while your web browser is playing (even paused, often) something else, then it will throw that kind of error.
You gain nothing extra from bitstreaming, provided you have installed dtsdecoderdll.dll.
Generally this is true. You gain basically only the pretty little lights on your receiver. And you do sacrifice some features in MC to get them, and sometimes some reliability.
I still bitstream on my HTPC, but more and more I'm waffling on it. I recently disabled bitstreaming AC3 on the HTPC, but kept the rest enabled. I found that MC was
more reliable at decoding certain AC3 streams than my Denon was... With certain of my own recordings from my HD-PVR, only a few individual channels (Comedy Central and sometimes AMC), the Denon would "skip" and drop the audio out randomly throughout the recordings. MC decodes the AC3 just fine, and plays the files back perfectly. It was odd that it only happened on a few random channels, but I verified that it happened even if I hooked my cable box up to the Denon directly.
So MC's AC3 decoder is
better than the one in my Denon (more error resilient, it would seem).
For now, I've kept MC bitstreaming everything but AC3 in the living room. But I don't feel like I have a very good reason why I bothered and didn't just turn the whole thing off while I was at it. My server in the basement doesn't bitstream, and MC handles decoding all the different formats perfectly.