Re: Some of my movies are AC3 others come up as stereo So no sound sometimes
No real answer. Much more specifics about your hardware, codecs, and equipment is probably needed to "know" the answer.
VOB files are huge. Why not convert them all to about 1/3rd the size and drop all the non-extras?
Handbrake-CLI at 19.5R doesn't show any artifacts that I notice. It can transcode pretty easily at about an hour per 2hr movie for the conversion to h.264 with audio copies (I retain English, French and Spanish audio) and subtitles included in the resulting MKV file. Of course, the CPU and RAM available will matter. Don't bother transcoding if your XBMC machine is an Atom-based or low end CPU and you probably want to pull the VOB directory over to the physical machine, even on a GigE LAN.
I don't keep any intermedia VOB files around (deleted when I box up the DVD to the attic), but I can say that AC3 or Stereo doesn't seem to matter for playback through HDMI connections. I don't have optical or coax audio connections. Sorry.
My xbmc box has nvidia hardware and MPEG + h.264 codec support built-in. I suppose the drivers could be handling the audio conversion to PCM for me, but I know that a WD TV Live HD never had sound issues before I switched to XBMC either.
I also record TV shows and retain whatever audio channels were included in the broadcast. PBS often has 3+ audio tracks, which makes it fun to find the correct one to mark as "main" during playback.
Linux User since 1993. Loving Linux since 1996.
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