Preferred Audio Output, USB or 3.5mm?

Since the original topic is about 2 channel, I don't believe regular HDMI to be the better connection. It's just not necessary and it isn't a superior connection compared to other, less expensive to implement options. SPDIF, usb and firewire is fully capable of transmitting hi-res 2 channel formats. You can use a $40 hdmi audio de-embedder for SACD's and the uncompressed audio tracks on blu-rays and run the spdif output to your favorite dac if you must. You can rip the DVD-A's stereo tracks to your computer and play them through your dac as a file or burn them to a disc and play them through a regular dvd player.

What about Hi Rez Bluray audio?

If bluray audio catches on, then that would be great, but i wouldn't put any money on it at this time. Time will tell. I think hi res audio downloads fill this niche quite well. No need for encrytpted hdmi and multi channel avr's for those that are only interested in 2 channel music in high resolution formats.

There are also some great Bluray concert discs and methods for listening to them in uncompressed audio without hdmi. Check out the $40 hdmi audio deembedder from monoprice. Or, buy a bluray player with good analog outputs. I agree that HDMI has a place in HT though if you need video and multi channel sound.

Video is important with Bluray, DVDA and music/video DVDs.