Connect the HDMI from the BD to the HDMI input on the receiver. Then set your BD player to Multichannel output (not bitstream). This will send HDMI audio in full HD glory to your receiver.
Then, connect the HDMI output from the receiver to the TV. The receiver strips the audio and sends the video signal to the TV. Set your BD player to output the native resolution of your TV. Likely 1080p. Set the HK receiver to passthrough video on the HDMI port. This will send the video at full quality 1080p to the TV. These signals are all digital so there is no change in quality passing HDMI video through the receiver.
