I’ve now become convinced that, at least using either the TS or MKV containers, WD Live can’t do surround sound.
I’m using the optical out (because according to the manual that’s the only way it can do it) and it’s definitely optical on my receiver (because if I unplug the optical cable the sound stops and my receiver shows no input) but no matter what the audio container – DTS, AC3, DTS-HD, True-HD – it only reports 2 channels (left and right).
On examining the streams there are definitely 5.1 channels, and they play properly on my computer, but WD Live ain’t outputting them. So – the big question is, is there some container that can play 1080p along with 5.1 audio? Or should I start shopping around for another media server?