This is by design. A PC will not pass compressed audio over HDMI. You will need to set your sound card to decompress all the audio streams before transmission. This is assuming you have the proper codecs installed.
In my opinion it is much better to use dedicated devices for their individual functions. When you by a stand lone player you can be assured that all the equipment and processing is being dedicated towards only what you need it to do. They are also far less power hungry and usually easier to integrate into your HT environment.
This is not to say that installing an HTPC cannot be done. It is, however, far more time consuming to set up and maintain and will come with all the problems that usually accompany any computer set up.This can be great if you also intend to game with this set up but it is not suitable for much else as text will not have the same ease of reading on a television or projector without modifying the output settings, which will not guarantee the same application of settings across all your applications.
I must disagree, I run 5.1 over HDMI for everything (pc audio, games, stored videos) All you need to remember to do is to go into the configuration section of the windows audio control panel and set your speaker setup to 5.1 or 7.1. It defaults to stereo unless you set it correctly. The video card will output what you set it to as long as its new enough. Nvidia 400 series or AMD 3000 series or newer should have no issues doing this, earlier cards will have had technical limitations that prevented output in anything besides stereo. Intel 2000 series or newer video should do it too.