It might be helpful for me to elaborate the scenario - 3 separate devices:
digital source (disc player) --> DSP --> DAC
Consider a digital source playing all zeroes (say a test signal). The DSP dithers it, so its output is never all zeroes (the LSB is randomized). Thus, as long as the source is playing something, the DAC will never see all zeroes. Thus whether the DAC auto-mutes on zero input becomes irrelevant. It will never auto-mute.
Unless:
1. A DSP that dithers, stops dithering when it detects an all-zero signal.
2. The DAC auto-mutes on all zeroes ignoring the LSB.
Either of the above 2 conditions would seem incorrect/broken to me - they shouldn't happen - right?
Put more simply: I've discovered that one of my DACs auto-mutes on all-zero signal. I put a DSP in front that dithers the signal, and the DAC still auto-mutes! Thus, something must be broken - right? Either the DSP isn't properly dithering, or the DAC is ignoring the LSB.