I personally CAN CONFIRM that X Box One X, set with HDMI to TV and Optical to BOSE SOLO 5 (same Dolby Digital only support as Sonos) CAN TRANSCODE DTS TO DD 5.1 in The fly.
Audio option HDMI Bitstream
Bitstream DD 5.1
Deadpool Blu ray that has only DTS OST
X Box trough HDMI to TV
TV via optical to soundbar
TV LG OLED B6V that has 5.1 passtrough
As a counter proof I set Bitstream to DTS and resulting audio was mute.
This is X Box one X but S is The same.
Hope this can help