I connect it via option 2. What I find weird is that my minix media player is decoded properly even with uhd color on. I even tried using the hdmi cable of the minix and connected it to the onkyo. Same issue. Audio input becomes listed as analog. But when I put back the minix player it becomes hdmi as audio input.
Just as additional background I came to discover this function as the culprit when I was figuring out whether the arc hdmi port had anything to do with it. So as I was switching the hdmi ports on the TV, sound came on on my receiver with the TV off. When I turned on the TV, it prompted to activate uhd color. When I did, sound dropped out. When I deactivated manually, then sound came back.