I have just inserted my old 565z3 between a Sky+HD receiver and an 818v3 to achieve a similar thing.
There are a number of operational issues such as Controller status, delay and synchronising inputs to be solved but it works well and sounds good.
I configured the 565 for a two-channel large digital set-up: Type 3, Layout M, No Surrounds.
Needs some extended listening and tweaking to decide if it is a keeper set-up.
interesting that someone else has done this too. in my use case, I don't think that there would ben a problem with controller status or sync'ing inputs as the device would be standalone. it would stay on a single input and not change anything in use. delay is an interesting one and I'd not considered that.
You’ll have to set the output to HS=N or the output will be encoded.
Hmm... I'd forgotten that.
Will it also encode the output of high res stereo input too, or just decoded surround sound? I mean I don't see it being a problem TBH, it would be between the TV and the DAC, my audio streamer feeds into my amp via USB anyway