Thanks Jack, I will try that when I get home tonight. I've noticed that when TV/CABLE is the source, I am able to get sound via either stereo or 7.1, depending on the channel. But when I have the source on the AVR as DVD/BD (PS3), it just says "STEREO", and there isnt any sound.
Im thinking its a problem with the PS3 setup because my last receiver didnt have HDMI capabilities, so I went directly from the PS3 to my TV with an HDMI and an optical cable from the PS3 to the AVR.