A fair question. If the encryption behaves the way I understand it to from the DCP material, then I think one must conclude that the AVR generates a new signal. (Yes, I know that assertion can be debated, but one point at a time!)

Now, if the AVR generates a new signal, that has significant implications when configuring and troubleshooting HDMI setups. For example, it would mean that signal degredation on the TMDS lines was not additive over the two links when going from source to display through an AVR, the way it is additive when going from source to display through a typical balun. Instead of being additive, it would be "weakest link" determines the integrity. (Again, I know my conclusion here is debatable, but I'm just trying to explain why it is important to me to understand. I'll try to justify this portion of the argument if we get that far. First, we need to deal with the encryption issue, because if I am wrong there, then my whole argument likely goes away!)

I have put together a diagram that shows my understanding of the encryption, which I will post in a moment. I'm not sure how much it will help me or anyone else, but it helped me to put it together, so I'll post it and we'll see.