It's actually the reverse, the PS3 will decode the format and send it decoded by LCPM via HDMI to a receiver that cannot decode the new formats , that's how I do it with my PS3 and Denon 4806.

If the receiver can decode the new formats you can send the new formats via bitsream and let the receiver do the decoding. I don't think there is an issue with SQ or PQ either way.

A computer once beat me at chess, but it was no match for me at kick boxing.