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Hope this helps someone having Dolby 5.1 streaming issues.

I record OTA TV using EyeTV and then compress the programs to stream from iTunes to my new AppleTV. My issue was first What to use as a preset to have 720P video and Dolby 5.1 audio. I tried the 720P setting in Turbo.264 HD software and had excellent picture quality but only stereo sound. I had recorded a program with Dolby 5.1 so I checked the EyeTV file and sure enough the audio was 5.1.

I tried many hardware things but nothing fixed the issue. I the looked at the compress version from the Turbo.264 HD software in QuickTime 7 player and check the "movie properties" under the Window menu. I found two audio tracks. a stereo ACC track and a Dolby 5.1 AC3 track. I deleted the stereo track and resaved the compressed version as a self-contained movie. I added it to my iTunes library and when streamed plays the Dolby 5.1 audio. So for those having trouble with videos you have compressed for Apple TV 2, it seems that when two audio tracks are present Apple TV defaults to the stereo track or perhaps my MacBook Pro is triggering that since it does not have an optical out connected to the audio jack. There you go for what it is worth.
 

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Thanks for the tip. I'm curious to know which eyetv hardware let you record 5.1 ac3. From what I see, eyetv hd hardware only has a pair of RCA inputs for audio, so no ac3 there...
 

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Thanks for the tip. Always great when members post helpful hints and give back to the community.
 

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I connected my MacBook Pro to my AVR via HDMI and at first I could also only get 2 channel audio. I then found an audio setting which allowed for DD5.1 (and DTS) via HDMI to the AVR. Not sure if it has an effect here, but perhaps these are related.

I was simply playing a DVD to ensure that my HDMI dongle audio was working properly and it took me a couple of minutes and a couple of different DVDs to ensure DD5.1 and DTS were getting bitstreamed to my AVR. My MacBook doesn't have a BD player, so HD audio is not possible. I can't remember the format that was getting to my AVR with the default setting - it may have been multi-channel audio, but it was only two-channels (stereo).
 

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I found this out the hard way this week.

If encoding, let's say, an .mkv file to an .mp4 be sure to change "under the audio tab" to AC3 passthru. That seemed to do the trick for me. In other words, make that your FIRST audio track.
 

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I am pretty sure you can change the audio stream on-the-fly in the ATV. Too late for me to test it but I had an M4V file with 5.1 AC3 and AAC stereo. It streamed via wifi which I assume you are talking about.

Just occurred to me are you talking about the ATV2? I was.
 

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I must be confusing it with my WD TV Live (which can do that). I could have sworn I saw an audio stream option in iTunes.
 

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iVI conversion software

iVI, which is available at the App Store or at South Pole Software's website converts just about anything and makes multiple copies that get sent automatically to your iTunes file and when you choose it on Apple TV2 it plays the 5.1 AC3 audio track and when you choose it on your iPhone, iTouch or iPad it plays the AAC stereo track. For 4 bucks it's an awesome app.
 
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