Audio Connection Type
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Tools > Options > Video
See also: Video Playback Options
Overview
Media Center can optionally bitstream the audio inside a video to an external receiver (or other outboard decoder). When bitstreaming, Media Center can not analyze, room correct, equalize, mix, or do any other processing of the audio. For this reason, bitstreaming is not recommended.
When To Use Bitstreaming
Only consider bitstreaming if ALL of the following are true: 1) You have at least 5.1 speakers connected 2) You are using an HDMI or S/PDIF connection 3) You have a receiver (or outboard decoder) capable of decoding formats like Dolby Digital and DTS (and preferably the latest formats like Dolby TrueHD, etc.)
How To Enable Bitstreaming
In Tools > Options > Video > Audio for Video, DVD, & Television > Connection type > Bitstream