On the Denons there is Auto Setup, which I believe your talking about. There is also Room EQ, that if turned on, will adjust various frequencies of your speakers to your room characteristics. I do not use Room EQ as it makes my m60's have to much treble/midrange sound. Alan from Axiom has mentioned many times to not use the EQ portion. By default it is turned off in the menu anyway.
To answer your question, I had the 350 before upgrading to the 500. I would put the volume about at the 10 or 11 o'clock position. When you run the setup, the dB level on the receiver will be adjusted based on the test tones, and most likely will be around -3dB's or so. If you have the sub gain lower, the receiver will be closer to 0dB's to get to the desired SPL.
Sorry for my rambling, hope it makes sense..
