Codifus:
I think I understood all you said. I do have an HDTV but when I try an HDMI hookup to the blu-ray, the sound comes out of the TV speakers which (obviously) are not as magnificent as my JBL's. The TV has ONE HDMI connection so, yeah, I get the video at 1080p (nice) but the audio ... meh. If I utilize your example, and if I understand properly, you're saying I can get full video (1080p) if I hook my blu-ray directly to the TV and then output the audio via composite to the receiver to get (to your ear?) DRM limited audio through your main speakers (better than TV speakers). With the AVR7000, I had the HDMI from the blu-ray into the AVR7000 and a video out (S-video) to the TV. I sacrificed video for audio. The burning question is why should I have to compromise anything?
With the setup I suggested you compromise less in the audio downgrade than in the video downgrade for your previous setup.
Your video setup downgraded 1080P high def video to 480i/p standard def video through your s-video output. AND your 94/24 surround mix got dumped into the TV and it didn't really do much with it
In my setup you get 1080P in all its glory and audio is downgraded from 96/24 to 48/16.
Remember, downsampling does not involve any compression, and the transfer is digital from the blu-ray player to the receiver. So the only loss is in the downsample from 96/24 to 48/16. Compared to MP3 or any other lossy format, the downgrade is fantastically small. The numbers make it look worse than it really is. To get a better idea, think about this: 16 bit audio has a theoretical max dynamic range of 96 db, and most audio products, like CD and DACs and such, have pretty much achieved that. 24 bit audio has a theoretical max dynamic range of 144 db, and most audio products
haven't come any where close to that. With most 24 bit audio, you get a real max dynamic range of maybe 104 to 112 db. It's better than 16 bit, but not much, not much at all. Also, 96 db dynamic range of 16 bit audio is more dynamic range than we will ever, ever be able to appreciate anyway. And in movies anyhow, it's all about the visual and aural experience, and audio is not the priority. In audio, it's just about audio.
The only downside I see to the 96/24 to 48/16 downsample is that documentation suggests that the LFE track of movies is left out of the mixdown sometimes. I don't know why they just don't leave it in the mix. I like my bass

In my experience, with DVDs that is, that hasn't much of an issue except with one movie, and I just went in and chose another soundtrack, like Dolby surround instead of DTS. With my blu-ray player, so far I've found the 48/16 mixdowns to be the best movie soundtracks I've heard, excluding the full 24/9 surround mix, of course.
These discussions have made me realize something else: the consumer audio manufacturers are employing this divide and conquer approach so as to maximize their profit margins. This is another part of the reason you have to compromise. There's another thread about the HK980 and the HK3490.
The HK980 is built to please the 2-channel audio guy,full stop. The 3490 is built to please the home theater individual whose priority is 2 channel audio. The very heart of their differences is the type of amplifier architecture they have.
I haven't shopped for an amplifier in a while until recently but the general rule for amplifiers that I believe still applies is this:
Class A amplifiers are the absolute best for sound but hardly anyone makes them because they are extremely in-efficient and hence consume gargantuan amounts of power.
Class AB amplifiers are the next best. Their efficiency improves without sacrificing too much in sound quality, compared to Class A.
Then there are all the other Class types, D, H, etc. These types are even more efficient, but they sacrifice even more in terms of sound quality.
When I used to look at surround receivers, it used to baffle me how they could produce so much power, AND drive 5 to 7 channels from a box that is not that much larger than their 2 channel counterparts from yesterday.
Through some posts from PENG, now I know how to tell what type of amplifier architecure a device is using, and that explains how they've been producing all that power. Look at the the amplifier's max power output and compare it to its power consumption. ClassAB amplifiers will hover around a 50% ratio, and Class D, H etc will have greater than 60% ratio. These are generalizations so please don't take my numbers as hard and fast.
Now, compare the HK 980 and the 3490. The 980 puts out 80 watts/channel and has a consumption of 410 watts. The 3490 puts out more power, 120 watts, yet has a max power consumption of 310 watts. Hmmmmm.
Anyway, I may have elaborated too much but I hope this helps!
CD