The lossless stuff requires either HDMI or direct analog outs. But the analog outs only get you 5.1, not 7.1 (the Panasonic DMP-BD10 is supposed to have 7.1 analog outs).
I was lent a Sony BDP-S1 Blu-ray player and some titles the other day to demo. I have been holding off to make a purchase because of the uncertainty in the formats. Without having my own experience, I was leaning HD-DVD early because it was ready for the market at realease, compared to the sub-par early Sony releases. Although Sony is looking to make a run now that their technology is catching up to the early promises.
I do think this player does a fine job in both picture and sound with the more recent titles I have seen (Corpse Bride, X-men 3). Load times are quick, but remote response time for certain functions like chapter skip, scan are slow (about 1 second delay). It has a very good build quality, all metal case, not plastic, and beautiful front. Others may prefer the Panasonic DMP-BD10 however, as it supports DVD-Audio and redbook CD formats, which this player does not.
I could certainly be happy with the picture and sound quality of the Sony, but before buying anything I would love to try a Toshiba XA2. I am not trying to recommend Blu-ray over HD-DVD or vice versa, just passing on what I've seen here. Unfortunately my projector limits me to 720p, but it does look great.
