I have an issue which is related to the audio changes in the 2.0.8 -> 2.1.0 upgrade. I have found a workaround / fix but wanted to mention it anyway for awareness.
I am using a Realtek onboard audio, configured
as previously described by dttsou, with front headphones and rear speakers set up as separate outputs. This is convenient, as I can simply switch my output device from "speakers" to "headphones" and back as needed. I also quite like the changes in 2.1.0 which added the "output device" to the context menu -- previously I had to open the configuration page to change my audio device, and then restart the file that was playing.
In v2.0.8 I had configured DirectX audio output and set my audio output to "7.1 channels", and this worked fine whether I used the speakers or headphones. However, after upgrading to 2.1.0 (actually 2.1.1, but I tested and confirmed the same behaviour in 2.1.0), I found that listening to stereo tracks through my headphones resulted in the audio being panned far to the right. It was not
totally right-channel only, as I could still hear low-volume sound in the left headphone, but it was still quite annoying. This only seems to happen with stereo tracks; videos with 5.1/7.1 audio seem to play normally through the headphones.
The problem can be easily fixed by going into the configuration page and setting the speaker config to either "2 channel" or "windows default"; when I do this, stereo and surround tracks both work fine in my headphones. However, it seems to me that the fact that VLC produces audio panned far to the right when the speaker config is set to "7.1" but the audio input and output are only 2-channel, should still be considered a bug (though a minor one).
Finally, on the main question of this thread I also think that it would be a good idea to keep the output channels option (previously "audio device" in 2.0.8), but also include the new 2.1.0+ "output device" option. This seems like the best of both worlds -- those with external audio devices can configure which output format they want to use, while those of us who want to switch between devices (eg speakers vs headphones) can easily do that from the menu too.