We live in an area where we have occasional internet outages. Imagine my surprise when our whole home audio system goes haywire when we lose connection. I called our installer and he says the system won't work without an internet connection. This is bad when we can't even turn the cable TV audio off. Is this for real? Does the system completely seize up when it can't see the internet?

I've seen it do this myself - but no it should not. I'm unclear on what the cause is at this point, but it's an issue with the router (or certain routers).

The root cause is not clear AFAIK but numerous dealers and C4 have been discussing this on and off.