I'm glad you got it sorted out.
If you are ripping to mkvs, then HDCP won't be an issue as long as you use a player like MPC-HC or VLC.
The 2.1 music is very likely be a setting in the receiver. I'm sure you can find it in there, my Denon has it. Alternatively, you may be able to configure XBMC to mix the 2 channels and create the LFE, I don't know if it has that ability. The Audio codec I use can as well as fddshow (and probably others) but vanila XBMC can't use directshow filters so it will not work anyway.
