Hi Carl,
That is my take too, but, the advice from M seems to be ID40 in the 808 is preferred. So, their point must be that the noise in the 861 is greater than the impact of transforming the audio to an SPDIF/AES signal and then converting it back again once inside the 861v6.
Given that the 808 is a 2ch source and ID40 doesn't do 5.1 I'd really have a go with your Option 1) as that will sound very different especially if the +3dB tweak hasn't been applied in the 861.
But assuming that is true, once inside the 861v6 the audio is back in the 861v6 'noise' again.
I can't help but feel that M�s statement was comparing [my] options 1 and 2 and not 3.
This is where a missive from M would be most helpful.
Regards,
Carl