5 HDMI ins/1 out, is the biggest chip I can get right now. But it isn't even as flexible as the 4-in chip. I've not done much looking at the HDMI board yet. But I am considering the 4-in chip paired with a separate 1-out chip. But what I could do is use two 4-ins together, for 8 total.

I'm building this as a platform (actually, the way I've designed the DAC board, I could easily substitute in a cheaper un-balanced RCA, based design with 8 stereo DACs, or even two 8-channel DACs). I'm not ruling out features, just not going to bother licensing them at first. But the DSP chips I'll be using have enough power to decode Dolby/DTS lossless up to 96 kHz (at least), and run either Audyssey or Trinnov processing. I'm still looking at how to get a mic hooked up. But that's an analog in, and makes things more difficult. I could also possibly support HDMI Audio Return Channel, it's in the chips, just needs to be assigned to an input (but it could possibly have AC3 audio, which needs a license).

It'll definitely have distance delay compensation. There's 256 kB of ring buffer space per DSP. That's allows up 42.667 ms of delay for 8 channels (each DSP will be handling 8 channels). Multiply 42.667 ms by the speed of sound, and that allows for speakers to be up to maximum difference of 47.6 feet.

Individual channels trims, adjustable in 0.5 dB steps. The master volume can also use 0.5 dB steps. The neat thing is, it's even smoother than that. When you go up or down a half dB, the volume ramps in 32, 1/64th of a dB steps. Even cooler, that's not even linear, it uses a logarithmic acceleration curve to reach the requested volume. It (un)mutes the same way.

Also multi-tap FIR filters for crossovers. That allows for phase aligned, highly customizable settings. I'll be doing the crossover work in the main CPU, and handing the resulting channels to the two DSP chips. Well, that's my initial plan. Still need to figure out what chips, and how many.

That brings me to your first question. HDMI carries at most 8 channels of PCM audio. Most of the time these are configured as 7.1, but the .1 isn't true, it's a full frequency range channel. That doesn't matter for this discussion. Just know the player is decoding what ever is on the disc to PCM and outputting how ever many channels result.

Those channels hit the first chip. This is where I'd be running Dolby's, DTS's, Audyssey, Trinnov or my custom processing to create additional channels from the existing. It can look at everything about those raw channels, and manipulate them in different ways. Say your disc has a 5.1 track, but you've got a 7.3 setup. So the processor looks at the surround channel, and creates rears from that. Then it moves onto the bass processing. You have two subs in the front of the room and one in the rear. You want all the subs to get the LFE channel from the disc, so it's mixed into all three, but you want stereo bass for the front of the room, so the crossover of the center is mixed into both front subs, but only the crossover of the left main goes into the left sub, and right to the right. The bass signal from all 4 surround channels is taken into the rear sub.

That gives you a total of 10 output channels. The first DSP handles channels 1 to 8, the second 9 to 16. These might be assigned as:
1. Left
2. Right
3. Center
4. Left Surround
5. Right Surround
6. Left Rear
7. Right Rear
8. Left-Front Sub
9. Right-Front Sub
10. Rear-Sub
But there's nothing fixed about those assignments. You can plug into any jack and send that signal to any speaker. (The Trinnov code actually has discovery routines to try to figure out where the speakers are in the room, and auto-route the channels.)

The order of processing in the first CPU is:
Channel creation (from existing signals, dematrixing, or sinks which will receive crossover information or mixes).
Crossover processing, remove the low-cut info, and prepare it for mixing.
Mixing, combine signals from other locations into the final assignments.
Send the channels to their proper DSPs.

The DSPs don't seem to do much right now. They're just handling the delay alignment. But they'll also run any room correction processing, EQing, standing wave attenuation, etc.
Pioneer VSX-1018AH-K, PDP-5020FD, DV-79AVi
Axiom M22s, VP150, QS8s
Sony PS3, surround backs