The receiver won't upscale anything it receives via HDMI, so your PS3 will have to handle the upscaling. As for the other questions, just run HDMI to your receiver, but the PS3 can't bitstream, so you will only see PCM on the display, but the PS3 will be internally decoding the new audio codecs. When playing a movie, you can verify what audio stream you are using by pressing the select button on your controller, or blu ray remote, it will tell you at the top of the screen.