This issue has been driving me nuts for weeks. I love Shadow as a service, but it has been next to impossible to get correct channel surround sound to work till now.
The problem is that the native streaming that Shadow uses ONLY sends Stereo metadata to your Device/PC and there is no way of changing that. Even if you select 5.1 sound on your local PC, the surround speakers just replicate the front left and right speakers, even though it shows as a 5.1 input signal on your Receiver.
One solution given was to use a 5.1 or 7.1USB DAC and USB Forward the device to the Shadow VM. This seemed to work if the DAC had analog outputs, however, it was very buggy/glitchy and repeatedly cut out when I tried it. As for Dolby Digital Live/DTS Connect DACS, I couldn't get them to work at all.
The solution I have discovered is to set up Steam Remote Play just ONCE from your Shadow to your PC or Device (don't worry, you won't actually be using the Steam streaming service in its full form) and this should give you a new Sound Output option in the Sound Control Panel of your Shadow VM called 'Steam Streaming Speakers'. Select this as your Default Audio Output Device and configure your speakers as either 5.1 or 7.1. Another thing you can also do is change the Audio Sampling level in Properties to 32bit 48,000khz from 16bit 48,000khz (anything above 48k khz does not seem to work)
Now, as long as you have your local PC setup to have a 5.1 or 7.1 configuration, you should have full, non glitching surround sound with all the correct channels in place without any need to change any settings when you start up your Shadow.
I have yet to tell if the 'Use High Quality Audio' option in the Shadow Control Panel makes any difference to the Audio when using this method, but the change seems negligible if it does.
Hope this helps some of you, be good to know your feedback/opinions.