Most of the time, as you know, it is, indeed, a button/setting issue. Unfortunately, one has to know all the functions of the machine to recognize what's going on. I checked out the following blog, and a fellow had a similar problem as yours, and they simply replaced his unit for free. Here's the page:
http://www.hometheaterforum.com/forum/thread/216326/arcam-reliability
Couldn't find any other info on this specific issue, but maybe it will help.
In Stereo Direct the analogue sound is directly routed to the amplifiers. In all the other ways the signal is digitized (if it ain't already) then modified digitally in a very specialized processor. In your case that processor has just died. It can't be repaired and you must replace the entire board it's soldered on to fix that - it will be expensive.
Why it has failed ? I don't know, but, since it's a processor, even the smallest electrostatic shock is enough.
Hi,
Sometimes it happens. ( age ) or possibly cold solder
joint or mis communication on the Digital Controller
and DSP Unit.
• One way to check is to verify each input if it can pass
output ( line Out ) signals.( at the back of the unit )
• If it does then you just have eliminated a large percentage
on electronic circuits troubleshooting.
• There are more details or info starting
on page E 25 of the manual
[PDF]
Download the owners manual - Arcam AVR250 surround sound receiver
have a recheck and triple check on the settings.
But if you need a thorough investigation on the DSP
circuits , it might need a service manual 
http://www.service-manual.net/ashop/catalogue.php?cat=300
only with a fee.
And be the last resort as to confirmed if it is really the DSP.
• You can use an external amplifier or a signal tracer when
probing signal outputs on the receiver.
• Here is a link for sample troubleshooting :
a ) Start with the input , then to the op-amp IC. b ) check your cable like those above for co
these unit is just a guide, not the same as yours , but the
process o f troubleshooting and principle is the same.
Only if you feel to DIY.
• here are some basic tools should you need to DIY :
http://www.fixya.com/support/t5771014-st...
• here are some troubleshooting guide :
a ) Start with the input , then to the op-amp IC. b ) check your cable like those above for co
those above are sample troubleshooting , use it as reference together with the appropriate
service manual for your unit.
• On some they have manage to repair or partially troubleshooted same,
symptoms as yours.( they are not made for a lifetime )
Repair of that kind is not cheap ( needs proper tools and equipments ).
Welcome to the Electronics World.
But if you will not start , it wont lead you for something.
Also some have succeeded.
If there is a will, there is a way.
• Divide and Conquer to find the cause, Only if you can DIY
or have a friend to help you.
have the Service manual and give it to him or her.
It may take a while , but who knows it could be a loose
solder joint or missing supply on one of the components.
• Navigate and confirm with your Manual documentation
and if doesn't resolve your problem, one has to open
on it , and check on it thoroughly
Preventive Maintenance is cheaper than repair.
Thanks for choosing Fixya for assistance, Hope other
experts might try to help you.
.
,
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Not looking good, I'm afraid. Have tried re-assigning my components that have Digital Sound output (Sat/DVD) to different inputs in the back of the AVR250 and nothing - no sound. Still sound out is only via Stereo Direct. Can anyone else help please! I don't understand how the thing can just stop working!! Help. Regs Steve
This is going from bad to worse - anyone else out there with any ideas? The last one being that digital processor has died!
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