Update: After updating to BIOS 0024, I have been able to play BD movies with HD-Audio bitstreams without encountering any HDMI handshaking issues with the caveat that I do not use Automatic refresh rate switching under the Video options of Arcsoft TotalMedia Theatre 6. What this option does is automatically change the Intel graphics to 23.976Hz instead of playing it at 59.96Hz. As long as the BD movie is played at 59.96Hz the HD Audio bitstream plays correctly through my Denon AVR. I am not sure if we need an updated Intel Graphics/Audio driver to resolve this or further debugging is going to be required by the engineering teams. I've read countless posts over at the XBMX forums where other NUC users have encountered this issue when Automatic refresh rate switching is enable in XBMC. This issue is encountered on both Windows and OpenELEC platforms.
On the second issue of video artifacts/corruption/pixelation with 3D Bluray movies, my previous statement still stands that this is only overcome by not using hardware acceleration for the video decoding.