I do have a Fiio dac that I could use on the tv's optical out, but on some programming I get a really horrible noise...it's very odd.
Not really odd at all. Some TVs don't have a menu option to mix 5.1 sources to stereo PCM at their digital output. I'm assuming your DAC is a regular 2 channel DAC, and when fed a Dolby Digital or DTS signal, they usually make obnoxious noises (or with some DACs, nothing at all).
Steve