Originally Posted by Craig_Ehr

Okay, fine...I'll bite.

While using HDMI for your audio connection, the only time the "PCM" setting is currently necessary (at least that I can think of off hand) is for Dolby TrueHD tracks. If you selected "bitstream" in this instance you would only get a DD 5.1 lossy track, so therefore you would want to choose "PCM". Later, when presumably there is a firmware update to decode DTS-HD MA onboard the PS3 you would also want to select "PCM" output, otherwise you would only get the lossy DTS core at 1.5mbps (i.e. hardware limitations are pretty much confirmed to deny output of the new hi-rez codecs via "bitstream".)

Really, it doesn't matter whether you use the "bitstream" or "PCM" setting for LPCM tracks because LPCM is the same either way - there is no decoding on the player side nor on the receiver side.

For lossy tracks like DD EX and DTS ES (including DTS-HD & DTS-HD MA for the time being - see above) I would stick with "bitstream" because you won't get the rear channel decoded unless your receiver can process PlxII on a 5.1 LPCM feed, which is what the PS3 converts these tracks into while "PCM" is selected (e.g. although my Onkyo TX-SR605 has advanced features such as Dolby TrueHD and DTS-HD MA decoding via HDMI v. 1.3 it still will not do this).

Hope this helps.