I have had this metallic / distorted audio on my TM5402 M3 for ages and I never tried to fix it. I remember having read that it is a known problem.
Is it possible to do something about it?
Try them all! Dolby HDMI sounds like the option that would send the audio bitstream over HDMI for the TV or home cinema amp to decode, but relies on the connected display/amp being capable of decoding the bitstream. PCM means the receiver uncompresses the audio before sending it over HDMI. Dolby SPDIF will send the audio bitstream over the optical connector.
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