I'm thinking that the diplay dimming might be due to the power supply rails dipping. The "problem" with the 7-ch. stereo mode is that it is really 2-channel stereo (more or less), with the left channel fed to three channels (front left, surround left, and back surround left), the right channel fed to the corresponding three right channels, and probably a mono combination of left and right fed to the center. So, unlike a 7.1 source, there is a high correlation of signal peaks on multiple channels. Basically 7-ch. stereo is much harder on your receiver than regular 7.1, in terms of driving all channels simultaneously, with the same input signal.
Using the 4-6 ohm setting (the switch on the back of the receiver) will help a little in preventing the dragging down of the receiver's power supply rails, in that it limits the maximum current draw from each channel (probably by simply using lower voltage taps from the main power supply transformer). So, it likely reduces the probability of getting the display-dimming symptom you are seeing.
BUT, it also makes it MORE likely to get clipping of peaks in the signal, since you have lowered the maximum voltage that can be driven during a signal peak. Generally speaking it is better to use the 8 ohm speaker setting, even with lower-impedance speakers, to prevent clipping. You still have to watch out for thermal overloading of your receiver, of course.
Since your surrounds are probably less efficient than the larger front speakers, you might find that cranking up just the fronts in 2-ch. mode is a better way to get more volume during parties, than trying to drive all of the speakers with a 2-ch. stereo signal in 7-ch. stereo mode. It will take a higher volume setting to get the same overall loudness, but probably less total power output from your receiver (just more concentrated in 2 channels)
