Wireless set up for XGIMI Horizon 20 pro, Playbar & Sub using Ugreen wireless extender transmitter & receiver (CM506), Ugreen audio splitter HDMI to optical spdif convertor (CM677)

What are your sources? Where are they located?

First off, any optical port on a Sonos will only handle at best Dolby Digital, including the PLAYBAR, so I wouldn’t want to set any device to send anything ‘above’ that, like Dolby Digital Plus or Atmos.

Frankly, I’m not certain there are many users on this forum who have a ‘wireless’ connection to any Sonos soundbar, but @buzz is the most likely to work through your setup. 
 

As a note, optical is a one way transmission, ARC (or eARC) requires two way communication. As soon as you introduce an optical connection anywhere, your ARC will no longer be able to recognize what’s past that optical connection. 

My source is the xgimi horizon 20 pro projector.

I think ​@buzz meant the source of the content; cable box, streaming device, Blu-Ray player, etc.

Correct. Are any devices connected to the projector inputs? Are you using any projector Apps? Are you using an external input selector box? If so, what model? Where is it physically located? How is it wired to the projector inputs?

My initial plan was to use the apps within the projector only as it's running on Android. I have an old Android TV box (Ubox, can't remember the model) for streaming for live TV streaming, which I could plug in via HDMI directly to the projector as well. I do not have any selector box. 

Maybe move the Arc and try the Sonos cable to  make sure the two are talking together, then try the extended cable again?

My suspicion, without joggling ​@buzz ’s elbow here, is that the settings for the projector’s audio output are set to something higher (Atmos, or Dolby Digital Plus) than the bandwidth of an optical cable can carry.

Try Android TV Box —> CM506 —> CM677 ^^^ CM677 —> Projector. CM506 TOSLINK —> PLAYBAR.

Note that the CM677 cannot transmit 4K video.

Sorry I don't quite understand your proposed setup. CM506 is the one which has Tx & Rx. CM677 is the audio extractor with TOSLINK. 

Android TV box: 1 x HDMI

Projector: 2 x HDMI, 1 x TOSLINK o/p

CM506 Tx: 1 x HDMI i/p

CM506 Rx: 1 x HDMI i/p

CM677: 1 x HDMI I/p, 1 x HDMI o/p, 1 x TOSLINK o/p