I do have a good setup now.
Yes, you are getting the best audio quality you can by using MC to send music directly to your receiver. What I meant was that by using MC as the audio manager and source, then sending it to the receiver via the WD Live without any audio manipulation at that point, using JRemote as the controller for MC, you would have a single path for all media and the best audio and video solution with the hardware you own, with a very convenient way to control it all. (Replacing the WDTV Live Plus with an Intel NUC would have the potential to give you better video, but that is a whole other discussion.) With that solution you wouldn't have to think about which device you send the media to, the WD or the receiver directly. You could just play whatever media you want and send it all to the WD. That, in my mind, is a better solution than changing zones based on the media format. I haven't played with zones really, so I don't know if the zone switching is automatic or manual. On that basis, I thought you had a good solution.
Just on the Meridian vs Integra vs WD plus Integra, I found your post on the
WD Community earlier in the week. If all your FLAC files are rips from CDs, then all your audio is still CD audio quality at two-channel 16-bit depth PCM encoding at a 44.1 kHz sampling rate per channel. The FLAC files just aren't lossy like mp3s, and hence have higher
bit rates, but are still 16/44.1. For example I ripped a CD to FLAC earlier in the week, and the audio files are still 16bit @ 44.1kHz, but rather than a bit rate of 128, 256, or even 320 that an mp3 might be ripped to, they are in the 440 to 780 kbps range, with most over 650 kbps. They produce an identical audio stream to playing a CD with no losses, but they are still just CD quality. Do you have any real 24/96 High Definition audio files to test the Integra with?
When you tested with the Meridian, you say some of the audio files were High Definition, so you
could be comparing your memory of High Definition audio rendered on the Meridian versus CD quality audio rendered on he Integra, under your current configuration. Also if you used the Meridian with analog outputs (your WD Community post says you used a digital coaxial connection), that can add some colour to the sound, which may make it sound nicer. That is all in the ear of the listener.
Regardless of the difference between the Meridian and Integra, the WD is in a whole different and lower quality league. When you tested sending audio direct from MC to the Integra, vs via the WD, you say that in each case the Integra was receiving a bitstream from MC. Are you
sure of that? In order for that to be the case, you would have had to set MC up to bitstream the audio, and set the WD to
Pass Through that bitstream (is that the HDMI direct setting on the WD?) without any audio processing at all, leaving it to the Integra to decode and render the compressed PCM data from the FLAC file.
By my reading of the WDTV Live Plus manual, the best audio that the WDTV Live Plus can Pass Through is Dolby TrueHD. I couldn't find any mention that it can bitstream all formats, or FLAC specifically. It can, however, play FLAC from memory. So, my understanding of your MC to WD to Integra testing is that MC sent something, possibly a bitstream of the FLAC file, and if so the WD uncompressed and decoded the FLAC to a PCM stream. Involving the WD in the audio path in any way other than passing the data through to the Integra could reduce the audio quality.
If you were bitstreaming from MC through the WD to the Integra, then the Integra should have told you what format it was receiving. If either MC or the WD were processing the audio, the Integra would have just said it was receiving PCM (I think). It might also tell you the bit depth, sampling frequency, and bit rate as well.
I would be interested to know what you found if you set up MC to bitstream the audio from one of your FLAC files, and then see what the Integra said it got. Then try using MC Digital Signal Processing to improve the sound, perhaps by upmixing to 24bit/192kHz stereo, and see what the Integra receives. My receiver, which will be replaced at some time in the future, can only process up to 16bit/48kHz Dolby Digital AC-3, so I can't play much with DSP. There was a discussion on Interact recently about the choice between using Bitstreaming and MC DSP, with the weight of opinion falling on the side of MC DSP.
Anyway, all the above is why I said "I think you have a few options and a ton of settings to try to get your WDTV Live Plus to act as your audio and video DLNA renderer or transport device." If I was you I would be fiddling for ages with MC DSP and the WDTV Live Plus settings to get the best out of the Integra, while still transporting everything through the WD. But that is just me.
By the way I am no expert, and I'm just writing all this as it helps me to learn more about audio formats, coding and how to get the best sound from the equipment I have. So please don't take any of this as a criticism. It is more an exploration.