Apple TV3 optical connection to Denon AVR-1705 fails.

Are these two compatible at all? Has anyone ever set them up successfully?
The optical cable from ATV3 is connected to the Opt2 input on the Denon.
The Opt2 input is properly assigned to "TV" mode and the input mode is automatic. The system does seem to switch to ProLogic II as if recognizing the digital input - there's no sound however. Speakers work, and I beleive the optical cable works too as red light does come through. The ATV3 HDMI output is connected directly to a projector with no sound capabilities, and the picture is working fine but mute. Any suggestions?

A Monitor HDMI connection to me sounds like an HDMI output port - you may be connecting two outputs (AppleTV and Denon together).
You ideally need to connect AppleTV to an HDMI input on the Denon - if you don't have one spare you might need a separate switch.
Isn't there a simple set of HDMI in/out sockets ?
AC

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