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Yamahas typically do have information on their display which indicates a lot more than a blue light does, as indicated by eljay. I believe there's also often an "info" or "display" option (user menu or button on the remote) which allows you to see the information regarding the incoming signal on the OSD. (on screen display) and perhaps on the front panel.

Depending on the incoming signal, you may or may not wish to do further processing with the various DSPs which are usually described in the operating manual.

For example, with a DD2.0 signal, you may wish to invoke Dolby Pro Logic. With DD5.1, no further processing is really required - send the appropriate signals to the appropriate speakers. With two-channel audio, you may wish to listen in "stereo" or you may wish to invoke something like 5-Ch stereo, or one of the various DSPs mimicking various venues.
 

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1. The PS3 cannot send HD audio bitstreamed to the AVR, therefore the PS3 must do the decoding and send multichannel PCM to the AVR for HD audio.

2. If you had a BD player, you could bistream HD audio to the AVR and the AVR could then do the decoding.

3. If you use the 7CH Stero DSP, it did exactly what it's supposed to do and is not intended for movies - it's intended to send sound from audio (music) to all the speakers. What the various DSPs do (or are intended for) is usually described in the operating manual.

See the following FAQ on AVR features - HD/HDMI audio is discussed near the end of the FAQ.

http://www.digitalhome.ca/forum/showthread.php?t=76082

See also the following post, useful for those new to HD, AVRs, etc - FAQs, Search Tips, Optimization, etc.:

http://www.digitalhome.ca/forum/showthread.php?t=57741
 
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