Thanks for the reply Gonk! Will setting the Audio to Auto change it from 5.1 to 2.1 on CD's? I'm guessing it will.
As long as Pro Logic II is disabled, the player will not do any matrix processing to the audio. That means that 5.1 will stay 5.1, and 2.0 (such as CD's) will stay 2.0.
Setting HDMI Audio to Auto will cause the player to "negotiate" with your receiver to determine what formats it can accept as bitstreams and what formats it needs to decode for the receiver. Since your 807 can decode pretty much anything, the BDP-83 will output bitstream (meaning the player doesn't do any decoding). At that point, your receiver will be responsible for everything.
Also, by using the analog stereo out the Oppo uses a better DAC but, if Im following you correctly, the ultimate quality will be dictated by the Onkyo when it reconverts it back to analog? Sorry for the novice questions, this is all new to me!
The receiver does offer an option for leaving analog sources in the analog domain. I haven't used the 807, but I have an Onkyo processor that is based on the older 905. Both the "Pure Audio" and "Direct" listening modes will leave analog stereo inputs alone. There is a catch, though: it will mean the receiver can't do any bass management. Since you were identifying CD playback as "2.1" I assumed that you wanted the sub involved when listening to CD's. Since CD's don't have a ".1" channel, the only way to get a subwoofer signal is to do bass management.
If you want to, you can connect the stereo analog output of the BDP-83 to the CD input of the 807, set the receiver to either Pure Audio or Direct, and compare that to the HDMI connection.