Seing the reason of low quality in “Audio Reproduction” on the WDTV Live in its HW Limits and Media “Sources” is not ok on “my side”
if the WDTV Live amplifies any normaliized Audio as it does atm with Opctical Output.
This is a hardware/firmware fault and can be fixed for example.
The Analogue Output is from its Levels accurate but missing all Bass / Treble Quality if you do not pre amplify it.
I dont know whats the reason for it.On that part you are in my opinion absolutely right that this cant be compared to
better Hardware.
The WD has an “Audioplayer” for Audio Media and is called WDTV Live HD Mediaplayer and they do also advertise with it playing Movies and Audios. Otherwise they should have named it WDTV Live Movieplayer.
I know what you mean from Quality Hardware compared to expensive receivers and so on.
But if its sold as a Mediaplayer and being advertised as that it should work and behave normal in Audio Reproduction too.
Anything else customers can of course argue about becasue its advertised also as Audioplayer.

I like what you say and your technology skills seem to be far higher then mine belonging to audio.
I see it as a customer and i bought it of the Audiophil Playback Reasons too which it is advertised 