Ok, I understand that the PS3 is capable of decoding DTS-HD and Dolby HD surround sound from Blu-Ray discs. However, does your surround sound receiver also need to be able to decode this? My Panasconic Surround Sound receiver can decode DTS, Dolby Pro Logic I, and Dolby Pro Logic II. Would this play HD Audio if the Blu-Ray disc features it or will it just convert it back down to normal DTS?
I've heard that it can if it has an HDMI input. However, mine doesn't, so I connect it via Optical (which loses very little quality). Is that fine as well?