This is going to be a pretty niche question, but I'm hoping someone may be able to help out. I have a Grateful Dead Time Machine (basically a Raspberry Pi with a very specific purpose, which can play lossless audio of Grateful Dead soundboard recordings [ https://www.spertilo.net/ ] ). It has an HDMI out and a 3.5mm analog out. My initial hopes were that I could go straight from the HDMI out into my Bluesound Node, but I then realized that won't work without an ARC signal. I'm thinking about getting an extractor similar to this: https://smile.amazon.com/Tendak-Optical-Extractor-Converter-Splitter/dp/B017B6WFP8/ref=sr_1_9?crid=2G8OIUBP91FDT&keywords=hdmi+to+toslink&qid=1660187119&sprefix=hdmi+to+toslink%2Caps%2C93&sr=8-9 to extract the audio from the HDMI and output to toslink, which I could connect to the Node.
Basically, what I'm trying to figure out is whether it's worth it to get the extractor and set that up on the Node over the way I have it now, with 3.5mm directly to my receiver. I'm not sure if the audio would take a hit at all having to be processed by the extractor, or if it'd basically just be a passthrough.
I can't advise on netflix (don't have it) but I did have a problem with the supplied shield controller - home and back buttons were both extremely unreliable, even after a full charge, missing 90-95% of presses. Fortunately, I got two controllers as part of an amazon UK deal, and the 2nd one worked perfectly. I sent the dodgy controller back to amazon and the replacement also works fine, both before and after controller firmware update. So it may well be you too just have a dodgy button'd controller alas.
Kodi works fine for DTS & AC3 passthrough to on my receiver, when I switched it on instead of downmixing! I have switched to SPMC though, a kodi fork with better shield integration (voice search in and out of SPMC, SPMC shows/films showing up in recommendations being the ones I use most)
AFAIK, the shield doesn't support any interlaced modes at all, including 1080i.
With regards getting your Z5500 surround working (used to use that myself until recently!) you can use a usb soundcard on the shield, like this one (http://www.amazon.com/Turtle-Beach-Advantage-Digital-Adapter/dp/B0036VO4X4/ref=sr_1_1?ie=UTF8&qid=1463782348&sr=8-1&keywords=advantage+micro+ii) or an hdmi -> spdif splitter such as this (http://www.amazon.com/Tendak-Optical-Extractor-Converter-Splitter/dp/B017B6WFP8/ref=sr_1_4?ie=UTF8&qid=1463782375&sr=8-4&keywords=hdmi+optical+splitter) or there are RCA versions - either should get you AC3 & DTS support