The WDTV ranges of boxes are primarily a video streaming device with an embedded audio stream. The video watching experience is different to an audio listening experience. An audio system optimised for video viewing will not perform adequately when used for purely audio listening; and the opposite is true. I have a pair of Klipsh SB 3 loudspeakers which are lively when reproducing audiophile grade CD music yet sound like cheap boom boxes when used for watching DVD movies.
There are dedicated audio forums discussing SPDIF / TOSLINK and digital to analogue clock jitter and methods to overcome the digital jitter. The best on the net is hydrogenaudio: http://www.hydrogenaudio.org/forums/index.php?act=idx
Wikipedia has a good explanation why the SPDIF / TOSLINK issue will never be resolved. The issue is due to the original SPDIF / TOSLINK specifications and not the fault of WD. In essence the digital clocks in the WDTV box and external amplifiers cannot synchronise using a SPDIF / TOSLINK connection. A hard reset on the WDTV box will only give both digital clocks an initial synchronous pulse. Once the digital clocks drift and they do drift; there is no known method to physically maintain the digital clock synchronisation.
I used to build and modify audio equipment. I conducted a number of tests using a number of high quality CD’s, a Yamaha RXV 457 amplifier and a pair of Stax SRX Mark 3 electrostatic headphones. The analogue audio was reasonable for what the WDTV Live box was designed for; definitely not audiophile quality.
From the limited research I have done on streaming devices; it is my understanding that Sigma manufacture the majority of the chips used in streaming devices. Sigma is very secretive with their specifications. Sigma doesn’t publish the harmonic and inter-modulation distortion specification charts for their devices. Without those specifications it is almost impossible to match the Sigma device to an external amplifier and speakers.
Based on past experience; regardless of the manufacturer marketing the streaming device, if it contains a Sigma chip the audio performance will be identical. In the past audio guys including myself have traced the circuits on consumer gear and replaced the discrete audio IC output with a higher quality IC. This has resulted in a reasonable audiophile grade HiFi performance at a minimal cost. I have not pursued that path because my WDTV Live box is still under warranty.
Purchasing a streaming box is not an easy decision. I can only give general advice. It depends on the region you live in, the cost and availability of the devices on the market and most important will the device perform adequately for the job it was purchased. I would suggest before anyone builds or purchases a dedicated audio streaming device, that they read the hydrogenaudio forums and ask the forum members for audio opinions. If people encounter valuable information applicable to the members of this forum; maybe they will share that information on this forum.