Most audiophiles don't use VLC because of certain issues with audio output, lossless encodes and cue etc. support so don't wait features like this for VLC immediately.
And to benefit one would need a 24-bit sound card and a decent setup since the resultant resolution is 20-bit.
Initially I was not thinking about the audiophile aspect, but more like getting the original less-compressed waveform expanded for playback or further encoding, instead of playing the more compressed waveform. But yes maybe only audiophiles with good system could hear the difference between them.
However 24-bit sound cards have been around for ages and are very common these days (integrated to motherboard on new systems), and even AC97 codecs supported up to 20 bits. Another matter is how good they are actually reproducing the audio, they might suffer from noise problems, so the effective dynamic range might only be up to 16 or 18 bits. But same thing propably applies to cheap HDCD players too. I guess my point is that the (digital) hardware exists to play the audio, so that should not be the reason to ditch the idea completely, but the (analog) hardware might not be good enough yet to get the full advantage of the HDCD playback right now. Most soundcards also support digital S/PDIF output too, which is at least up to 20 bits normally.
I'm not convinced that means HDCD is supported in libavcodec. Looks to me that is just used for checking to see if it is supported DTS or something similar by looking at the WAVE header, however I could be wrong.
From what I understand, it seems that there is a bit in the DTS bitstream header (not WAVE header) which just tells what the master source material has been. As I have no DTS spesific info, I bet that flag just means the source material has been HDCD encoded to 16 bits, but it is decoded to 20 bits before encoding to DTS. DTS is a lossy compression so the HDCD data packets would not survive the DTS encoding. Another option would be that the flag indicates the source material has been HDCD encoded, and still is - so the HDCD decoding can be done after the DTS decoding. But in this case the HDCD data packets are still lost, so it would be relatively difficult to know when and where to do HDCD decoding - it can't be decoded all the time.