Speakers seem to be playing surround sound even though I do not have the hardware to do so?

You may have to access your AVR's menu to make sure your surround (back) speakers are on. Even though I have mine set-up to automatically detect the surround sound of the media I'm playing I have to go in my menu settings to ensure my surround back speakers
are on. Example would be, I play a movie that is 5.1 and my AVR will see that it's Dolby Digital. Well the back surround speakers aren't used in 5.1 so I go into my AVR menu and set my back surrounds as default when ever a 5.1signal is detected. I have
a Denon AVR 4806CI

I also have experienced the intermittent crackling - BUT only prior to this most recent update (last week; I am in the preview group). Of course, now my surround sound (cable box) doesn't work at all (nothing from the rear channels), so there's that...

I have a 7.1 setup. Out of the box, my One would play surround sound from 5.1 speakers. The funny thing was, for games, it used the left/right surround speakers and for TV, it used the back left/back right speakers... ! The March update worked great,
initially, but now I'm getting no surround from my TV (major bummer). Games seem to be OK (all 7.1 speakers producing sound)...

It's so disappointing that they can't get this right. Sound is super important to me. I hope they fix this - and soon!!!

While a headset may be better than the standard built in speakers on a television, they can't compare to a true surround sound system. By definition 7.1 is 7 speakers and a sub. Headphones do not have 7 speakers, they visualize surround sound like a sound
bar. I personally have a sound bar and find it to be amazing. I far prefer to the sound to fill my living room and keep my headset just for chat when needed.

Filtering noise coming out of a TV is pretty damn simple. TVs these days don't have very powerful speakers and are easily filtered.

Filtering the "noise" out of a surround sound speaker is a different matter. My Kinect filters my TV just fine. It doesn't even sort of do anything about my surround sound system, and my speakers are all at least 2-3 feet away from the POS.

So....

Since nobody has given an answer yet (the link for xbox troubleshooting doesnt even mention in-game settings), let me try to explain whats happening. Windows Sonic as well as Dolby Atmos for Headphones downmix a surround signal to stereo in a way that makes
it seem as if you're listening to surround sound. If you set your Game audio to Headphones the Game will not output 7.1 Surround sound but either pure Stereo or already have done the work that sonic is supposed to do. So, if your game has built in surround
sound (or binaural sound) for headphones turn off sonic and use that or use the speaker settings and turn on sonic. Dont turn on both or sonic will try to make a surround sound out of a binaural stereo signal. Trust me, that's not a good listening experience.