I just listened to a Dolby 2.0 soundtrack last night, The Piano, and I could have sworn up and down that it was discrete (5.1) sound. This S-1000 is literally so good, that it's Pro Logic II sounds like the Showcase in Dolby Digital!
That's correct about the HDMI, it is just for video switching for those with TV's that only have one HDMI input and they have multiple sources with HDMI output.