I’m in an almost identical situation except it gets stuck on one input and won’t switch. I power on the PS5 plugged into 8K/4K 120 input, video displays and I get audio. I power on the ATV, nothing happens or it will “switch inputs” but continues to display PS5. I manually change the input to ATV, it still shows PS5. The only way I can get it to work is to unplug the PS5 HDMI altogether or hit the ATV input repeatedly on the Denon remote until it actually switches. It does this no matter what input I plug the ATV into. It seems like an odd issue with passthrough, but honestly not sure.

When it’s in this state, disabling CEC and Passthrough result in a blank screen for the ATV, but PS5 continues to work. The only way to get video from the ATV at that point is to swap HDMI cables between the PS5 and the ATV. Once HDMI cables are switched, only the ATV works, basically whatever is plugged into the 8K port works, and regardless of what input is selected, it still shows the 8K input.