lpcm or bitstream for bluray?

the PS3 is sending out a digital PCM signal which your processor receives and the sends out to your amplifier. The decoding is taking place in the PS3 so your processor does all of the bass management from there. Its like there is double processing going on,

All the PS3 is doing is unpacking the digitally compressed sound formats into LPCM. The D/A is being done (once) in the processor. Note that you have to use HDMI output on the PS3 if you want surround as toslink is limited to 2 channel PCM.

Bitstream enables the receiver/preamp to do the decoding.
LCPM Lets the ps3 do the decoding, Some people with a nice decoder chipset in their setup will want bitstream.

They both are digital when they leave the ps3, thus requiring you to still use a dac.

curious, my PS3 can output bitdirect. New model?

My PS3-80 has a DSD logo on its side. I read that those units can output a DSD bitstream, but I don't have a processor with HDMI to try it. Some processors are said to be unable to both decode a DSD bitstream and do digital room correction, but Kal Rubinson has written that he observes no degradation in sound quality when going from DSD to PCM.

I assume the OP has read the Cary Cinema 11a/v thread at AVS.

db