This post covers the characteristics of the HDMI connection in a perfect HTPC.

Video support: The HDMI connection must be able to transfer video at 1080p (FullHD - 1920 x 1080). Even HDMI 1.0 is able to do this, so we are perfectly fine video wise.

Audio support: This is where problems start to creep in, depending on how your PC manages to get a HDMI output.

Nvidia graphics cards with HDMI output act as a dumb SPDIF passthrough (This is not to be confused with the AV receiver's passthrough). They require a wire connection from the motherboard's SPDIF pins onto the graphics card in order to be able to get the audio signals out through HDMI. Thus, all restrictions which exist for SPDIF audio also exist for this type of HDMI audio. Most SPDIF mobo connections are able to support only 1.5 Mbps bitrate (though some are supposed to be upto 6.144 Mbps), and thus, the HDMI audio out of such cards can also support a maximum of 6.144 Mbps only.

ATI graphics cards with HDMI output have an audio processing chip on board. They are able to grab sound through the PCI-E bus and need no mobo SPDIF connectors. This is pretty advantageous since installing the graphics card is a simple matter of plugging it into the PCI-E slot. (Depending on your mobo capabilities, you might need to connect to the AGP slot -- if you have a really old computer!). Whether the audio over HDMI from ATI graphics card is subject to the same issues and restrictions as the SPDIF outputs is not yet confirmed (One of the popular DirectShow audio filters, AC3Filter, is able to control ATI HDMI audio as a SPDIF output)

Present day Blu-Ray media have lossless HD audio codecs for their audio tracks. These include DTS-HD Master Audio and Dolby TrueHD. These audio tracks potentially need upto 36.864 Mbps of bandwidth for their 8 audio channels. SPDIF simply doesn't have enough bandwidth to support this. As far as I know, there are no ATI cards which support this much bandwidth also. If you want to get the sound out from the HDMI for these tracks, there is no option but to decode it inside the PC (VLC 1.0.0 claims it is able to decode DTS-HD and Dolby TrueHD in software) and convert to LPCM before sending it out through HDMI. Bandwidth requirements further restrict the sampling bitrate and frequency for this LPCM stream also, and it is not possible to maintain the same fidelity as the original sound track.

The funny thing is that all HDMI specs allocate 36.864 Mbps of bandwidth for audio (right from HDMI 1.0). Thus, it appears like the HDMI outputs from the graphics card manufacturers do not conform to any HDMI specification!!

As of now, audio over any PC HDMI port (be it the latest graphics cards or any IGP (integrated graphics on the mobo)) is subject to same restrictions as SPDIF. The only advantage over SPDIF is the fact that the number of cables coming out of the PC is minimized.

We need HDMI 1.3 at present to enable lossless HD audio codec bitstreaming. Standalone systems like Popcorn Hour and Xtreamer already claim HDMI 1.3 output support along with lossless HD audio codec bitstreaming. Mobo / Graphics Card manufacturers are fast running out of excuses. Manufacturers of mobos / graphics cards must clearly mention (with no small print anywhere) the version of HDMI supported, as well as the maximum available bandwidth for audio on their system. It is also essential that some APIs / support be provided to the DirectShow developers / open source developers so that the active multimedia community can make the best use of the platform to further the experience of the HTPC enthusiasts. The perfect HTPC will remain a Utopian dream until such a graphics card comes to the market.