WDTV Live Hub Audio Output. Need DAC?

Why do you need a DAC, how would that help?

Have a look at the sound setup on your TV, you may find a setting which limits the sound.

You can also play the audio via the AV  output to any external amp.

Out of interest you asked this same question over a year ago.

http://community.wdc.com/t5/WD-TV-Live-General-Discussions/MKV-sound-on-stereo-TV-Dialogue-too-low/m-p/314064