>>Perhaps instead of setting SCMS to unlimited, it always sets it to 
penulti-
>>mate, and that's the way it's designed to work, so no matter what the 
SCMS
>>setting of the input, the recording is always SCMS-final, but there 
always
>>is a copy made.

The C03 has an scms button that selects from four options.  The are as 
follows:

1. SCMS "Pass-Thru" Mode:
This mode merely passes all SCMS information received at the input source 
to the output sources with no modification.
2. SCMS "None" Mode:
When SCMS mode is set to None, the outgoing SCMS bits are set to indicate 
that there is no copy protection asserted (the material may be copied). If 
the source is coaxial or optical S/PDIF, then the CO3 actually strips the 
SCMS material out of the incoming stream and replaces it with bits that 
indicate no copy protection.
3. SCMS "original" Mode:
When SCMS mode is set to Original, the outgoing SCMS bits are set to 
indicate that the source material is the original material and not a copy. 
 Therefore, most receiving units will accept this material
4. SCMS "1st Generation" Mode:
When SCMS mode is set to 1st Generation, the outgoing SCMS bits are set to 
indicate that the source material is a copy.  Therefore, receiving units 
that include SCMS will not accept this material - this can be useful for 
protecting the copyright of commercial material.

All of the above was taken from the owners manual of the CO3.

>>Can you turn the stripping off, so that an SCMS-unlimited signal passes
through unmolested?

So, yes you can turn the stripping off so that it will pass an 
SCMS-unlimited signal.  I tested this, and it works with my unit.  However, 
the other three modes all function identically, as if the unit were in 
"Original" mode.

Thanks for any and all help that can be offered.  Iam particularly 
interested in those of you who have a CO3 that works correctly, and what 
the rest of your system is.
Thanks again,
Shawn
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