I don’t understand this thread, OP. You start talking about arc being limited to 5.1(depending on resolution), but you then speak of listening with a stereo sound system. You’re not going to lack bandwidth with stereo as it won’t deal with atmos dts or even pcm multichannel. In such a simple setup you either get stereo or no sound.
When you read that earc is necessary for lossless atmos, it does not mean atmos suddenly works with everything in your system. EARC just gives you a connection with enough bandwidth for the multichannel lossless audio and a 2 way stream. You do need something that handles and decode atmos(or dts), and ultimately, as the entire purpose is multichannel audio, a multichannel audio setup would seem kind of obvious. Typically a stereo DAC uses USB because for 2 channels you don’t need HDMI’s bandwidth.
Look, the most classic setup expected here is a blu-ray player connected to an AV receiver through hdmi. The receiver decodes everything it knows to, and sends the audio to a multichannel speaker system, while another hdmi cable goes to the TV for the video. that last cable only goes in one direction, from the AV receiver to the TV. If you want the basic tv programs to have their sound sent to the AV receiver, you need an extra cable, usually optical to send sound from the TV to the receiver. ARC and eARC, if the TV and receiver are compatible, come into play for that last action. It allows to Return Audio(it’s in the name) through the same HDMI cable. So instead of one to send signal from the receiver to the TV and another cable when you want the sound from the TV to go to the receiver, you can have ARC or eARC and just one HDMI cable can serve both functions. And that’s pretty much all it does.
I think that’s the most basic and typical scenario envisioned for this protocol. With eARC having a bigger bandwidth so it’s necessary for the biggest multichannel data rates(in this scenario!). As you correctly understood.
Before, people would just rely on switch, splitter, etc to send anything anywhere. Some still do.