Sorry, I don't have time to read the whole post but if you have HDMI running from your PS3, let the PS3 auto detect the audio settings. It should select AC3, DTS, as well as Linear PCM settings, the LPCM settings are what you want. I have a very similar receiver (STRDG720) and I let the PS3 automatically detect. Dolby and DTS are not reported on the AVR because they are being decoded by the PS3. Try those settings and pop in a Blu-ray. To take full advantage of the PS3's audio you want to *avoid* bitstream since that receiver won't handle the new formats.