The "Flat" setting is supposed to average all of your speakers to a common response curve. If your speakers are all the same brand and of comparable quality -and- construction type, then the "flat" setting is going to give you a pretty good average.
In my case, I have large tower speakers for fronts, and I like the "sound" of them without any equalization. So, I tried the "Front" setting in EQ and I found that it made my surrounds and center channel artificially bright to the point that movies sounded harsh, but music sounded pretty good. An interesting situation, that I fixed by changing my EQ settings back to "Flat" in the Yamaha and then using Multi-Channel or Pure Direct (RX-V2500) inputs for listening to music, which disregard the EQ settings entirely. I get "Flat" for movies in surround, and "Front" (effectively) for music.
I didn't like "Natural" -- it made my center channel and fronts sound a little muddy. I guess you can say it took all the bite out of my tweeters, but left all the midrange and mid-bass pretty much untouched.
In the end, it will come down to what you like to hear. I'd give "Flat" a try for movies, and use the Multi-Channel or Direct for music, and see what you think.
Greg