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
X Box one X DTS to Dolby
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I can, however, assure you that most times you talk to anyone at a Best Buy, they have no ideal what they're talking about. Always do you own research. I suppose the Magnolia guys may have more training than the average blue shirt, but who knows.
Best of luck.