I wish to take the audio output of a Tivo (toslink AC3 stream). Input it to my linux pc currently running ubuntu 14.04 (other distro suggestions welcome since I hate pulseaudio and want bit accurate audio output). Decode the AC3 stream to 6 wav streams and input these streams into my Xonar D2 audio card (card has spdif toslink which works for stereo pcm since I tested it with output of CD player and VLC) to generate 5.1 analog audio output from the sound card.

What I am trying to do is replace my surround sound preamp with a linux htpc. The only audio sources external to the pc (vlc and xbmc will handle video files and playing cd's, dvd's, and blu ray's) is the Tivo and some legacy analog stereo inputs.

I wish to use the pc as a surround sound preamp with parametric equalization and eventually use the extra 2 channels (I have a 5.1 speaker system with analog input) to bi-amplify the main speakers.

The only other external inputs I have are legacy stereo analog which I can use the line input of the Xonar D2 to digitize, but since these are not encoded I think I can figure what to do on my own for that (I think I can just use audio capture on VLC to do that job).

I think perhaps that ffmpeg with alsa could due the job but I do not know where to look for script examples of that type of operation.

what you write sounds like you want to build a sophisticated audio processing machine.
you might get advice here:
http://linuxaudio.org/

not sure what "bit accurate audio output" is supposed to mean, but you definitely should use some dedicated multimedia distro with jackaudio.

I'd go with JACK and Non-Mixer with whatever plugin you want to use.
If you're new to Linux audio, http://wiki.linuxaudio.org/ and http://www.linuxmusicians.com/ are good starting points.