Hopefully this is not a ridiculous question, so here goes. I assume these settings will also apply if you are using HDMI for both audio & video? I ask because this particular topic is being beaten to death over on another forum and no one consensus has been reached yet. Everyone has their own opinion including Toshiba (the DVD player mfg.) & they're all different!
So let me try & make sure I've got this. If I am running a HD DVD player and a HDMI capable a/v receiver and playing back either SD DVD's or HD DVD's, then in the HD DVD player's set-up menu, I would set the SPDIF to "Bitstream" & the HDMI to "Auto" or should the HDMI setting be on "PCM?"....This setting recommendation at least seems to be the most popular one on the other forum.
Ken
The SPDIF connection (the single optical or digital coax connection) can only carry so much data over it. PCM is uncompressed data, like what's on a CD, and the cable can only carry two channels worth of it. Dolby Digital or DTS are both compressed audio, like MP3, so by compressing the data they can send more channels through than with PCM. The receiver decompresses the signal if it understands DD/DTS by turning it into PCM internally, but some equipment doesn't understand DD/DTS, so that's why PCM may be the default or recommended method in the manual. With SPDIF, the cable is the bottleneck.
HDMI is a different story. The HDMI cable can carry a lot more data than the SPDIF cable can, including more audio data. If you use HDMI to connect your player to the receiver, then you don't need to use the SPDIF cable at all. The HDMI cable has the bandwith to transmit PCM for all the channels on the disc if you want it to. The audio on the disc can be decoded by the player and sent over HDMI as PCM, or it can be sent as a raw signal over HDMI and get decoded by the receiver, assuming the receiver is capable of decoding that format. You'll hear the same thing either way.
The choice is needed because there are so many formats for the audio. PCM, DD, DD+, TrueHD, bla bla bla. If the disc contains some format that the player can decode but the receiver can't, then you need to send it to the receiver as PCM, because it will understand that. The opposite may also happen - the disc contains TrueHD that the receiver can decode, but the player can't. This needs to be sent in bitstream format to the receiver so it can be decoded there. Happily you have an "auto" setting which probably figures all this out for you.