You need to set the PS3 to PCM output. I never use bitstream and let the PS3 decode everything. If you were having surround problems before, I suspect you did not have something set right with the 3808.
For sound quality, agreed. I think Rich was trying to troubleshoot the Denon though to make sure the right sound formats were coming through.
If you really want your Denon to display Dolby Digital 5.1, I think you do have to have the PS3 set to Bitstream. Otherwise everything looks the same coming into the Denon (in my case, when it's set to PCM, all incoming signals read as "7.1 Multichannel In")
