setup: philips dvd 963sa is connected to transporter's digital input (optical s/pdif). dvd audio output is set to 96khz. 

symptom: switching to digital input (optical s/pdif) while playing dvd -- audio starts playing via transporter noramlly. However, trying to adjust TP volume up or down mutes the device and occasional clicks-and-pop-random-sound-garbage is heard. Turning TP on and off from the remote (regular on/off, no reboot) gets the sound back, however any attempt to adjust audio results in the same situation. When adjusting volume clicks are heard after each volume adjustment step.

I tried various dvd discs -- result is the same. I did not try other inputs yet as I have only optical cable.

It was not the case with previous versions of SqueezeCenter / Firmware.

Let me know what I can do to help you debug this.

SqueezeCenter Information
SqueezeCenter Version: 7.0.1 - 17844 - Mac OS X 10.5.2 (9C31) - EN - utf8
Server IP address: 192.168.11.2
Perl Version: 5.8.8 darwin-thread-multi-2level
MySQL Version: 5.0.22-standard
Platform Architecture: x86
Hostname: macbook-4.local
Server Port Number: 9000
Total Players Recognized: 1
Cache Folder: /Users/eugened/Library/Caches/SlimServer
Preferences Folder: /Users/eugened/Library/Application Support/SqueezeCenter
Plugin Folders: /Library/PreferencePanes/SqueezeCenter.prefPane/Contents/server/Slim/Plugin, /Users/eugened/Library/Application Support/SqueezeCenter/Plugins, /Library/Application Support/SqueezeCenter/Plugins, /Library/PreferencePanes/SqueezeCenter.prefPane/Contents/server/Plugins
 
Player Information
Name: Eugene's
Model: transporter
Firmware: 40
The IP address for this player is: 192.168.11.6:50115
The ethernet MAC address for this player is: 00:04:20:10:05:5d
Voltage: 223