Make sure that you have set the PS3 to output 7.1 in the output settings. I have a fat PS3 (but new enough that it doesn't support SACDs) and it sends 7.1 signals just fine to my Pioneer 9140 (all 7.1 channel lights light up, even though I only have 5.1 speakers).Also with the scenario of the PCM coming from the 1st gen PS3, would I still be able to have 7.1 coming from the AVR ?
Make sure that it is a 7.1 source. If I play a 5.1 source on my PS3, it will send 5.1, while a 7.1 source will be 7.1.
Also, when playing HD sources (including PS3 games) make sure the PS3 is set to output PCM. If you set it to Bitstream, it will only send lossy DD/DTS (except for the slim PS3s).