Thinking about getting a DAC. My question is when hooking up a Blu-ray player, i need to hook it into the DAC( via optical or Coax) then the Blu-ray back to my AVR(via HDMI)? If this is correct, how does the AVR know to bypass the audio from the HDMI? Is the something i need to set on my AVR(Marantz SR7005) Thanks.
Have you connected your DAC to AVR analogue input? If so select the source on AVR where you connected the DAC. This will work straight away if you just want to listen music (audio only). If you want to watch movie with DAC'ed audio then your AVR should be able to merge both HDMI video source and DAC audio source. This is possible in my Yamaha receiver but not sure about yours.