I have my PS3 hooked up to my Onkyo 805 and yes the most you will see on your 805 is Multichannel. Because of a hardware issue, the PS3 will not bitstream multichannel. If you have a 5.1 setup just set the Onkyo to direct or THX Cinema, If you have 7.1 then set it to THX Ultra 2 this will give you the benefit of having 5.1 encoded discs output as 7.1 and 7.1 encoded discs will be output direct. There is no difference in sound quality between Multichannel and Bitstream (with players that allow multichannel bitstreaming like the Sony 350,550 players, with Multichannel the player is doing the decoding, with Bitstreaming the reciever is doing the decoding. But since the PS3 will only bitstream stereo sources, it is always best to set it to PCM.