Am I correct in assuming 'internal crossover' and 'subwoofer direct' are settings on the sub itself (I don't own a Velodyne)?
If so, you want to use 'subwoofer direct' if you are using the receiver's bass management and have set a crossover frequency in the receiver's setup menus.
When you use 'internal crossover', the sub's crossover is active and you now have two crossover's in the signal path (one from the receiver and one in the sub). You can do it that way if you turn the sub's crossover to a higher frequency than that which you set in the receiver (to get it 'out of the way' so to speak). But since the sub has a means of defeating it's internal crossover ('subwoofer direct') you should use that setting when using the receiver's crossover.