As for converting to DTS or DD, why not just use a USB audio device with DDL or DTS Interactive capabilities? You can even do that in software for certain programs/decoders, maybe there's even a foobar plugin?
...multichannel MLP (or WAV, I can save them as either format) files to DTS or AC3. Is there any freeware/shareware to do this....?
Yeah, DDL and DTS Interactive are on-the-fly transcoders, they were useful in the SPDIF days for multichannel audio (the only game in town for digital multichannel transmission with one cable). I had to google "ISTR". If you meant "it stands to reason", then it doesn't... not all SPDIF cards have that option. You can still do it in software with some decoders like ffdshow or ReClock which is a Directshow renderer with many very useful features.
Are the HDMI PCM streaming capabilities determined by the graphics processor, or by the audio hardware/drivers, or by the core processor?