After some Google searches and in some older threads here , I found that the WDTV Live downsamples everything to 44.1KHZ . So all Optical Output does is to allow one to use an ext DAC . There have been quite a few requests for a passthrough function from Audiophiles but no solution . Not sure why , maybe they have higher priorities .
Anyway I checked and my WDTV Live outputs 44khz PCM from Optical as well as HDMI . ( From info screen of the Onkyo Receiver) . I have a previous version of WDTV Live WDBAAN0000NBK and my firmware version is 1.03.49. If a later version allows pass through of 24/96 please let me know. Thanks