I've done hundred's of AC3 conversions, mostly from wav files, and have never had a problem with noise. However, in one of my last projects I noticed that there was a really annoying clicking or popping noise in the audio. So I got to thinking about what might have been different.

Most of my video work is home videos to DVD. I have the occasional capture from my Tivo, but rarely do I backup DVD's or otherwise work with commercial productions. So 90% of my AC3 conversions are from the audio output of my video editor. In this particular project, I noticed that the audio source was clipping on my video editors level indicator. I couldn't really hear any problem with the original file so I didn't worry about it.

I went back to the video editor and normallized the audio to 90%, or about 1.25dB down from clipping. After re-encode, no problem.

Summary: my conclusion is that AC3 encoders do not like clipped audio signals. This may also apply to other sqaure wave type signals as well since the encoder will see the clipped signal like a square wave.

I can of course be corrected by anyone.