The AVR will anounce itself as a repeater in the HDCP and EDID handshake. Announcing itself as a repeater does not make it a sink. Nor is it retransmitting keys. It's simply letting the system know it's there.
You have the source. It asks who is out there? It gets a response from the AVR that a repeater is present. It gets a response from a display that a sink is present in the system. Sink then is authenticated by source. High speed data is then sent.
In the document above, retransmission means pass through. It does not mean retransmit as in a network switch retransmits the data. It means the data into the repeater is allowed to pass out of the repeater without being turned off.
It announces itself as a repeater it is condered a valid part of the system by the source so the source will not turn off data. But it's not a sink. Without the sink no data is going to be sent.
Try the following test. Connect a cable box to an AVR and disconnect the sink. Tune to channel. Do you hear audio?
Add the display to the signal chain. Do you have picture? Do you have sound? Remove the display from the system. What happens?
Part of HDCP is that each device announces itself every 1.5-2s. As soon as sink stops communicating the system ought to shut down. As part of the low speed data issue, the aduio chat between source and AVR is the one most apt to be lost when system limitations are encountered. EDID is passed and understood, HDCP is passed and understood. Video data is sent from the source and decoded successfully by the display. Only no audio. The Display did not hear the quarry, failed to respond to the source to send audio and the no audio flag is set.
Concptually this is much more simple then you are making it. The AVR is not passing on a new set of keys. It is setting the repeater flag high and so informing the source that it is a legal device called repeater and that it will be the data on to sink
Sparkles are not part of the low speed data. They demonstrate issues with high speed data transmission. The eye pattern is not correct. Skew, the RGB timing, is off sufficiently that the error correction built into the system cannot compensate
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