Can someone educate me on what the functional as well as practical differences (read: differences in audio quality and or versatility) of a bitstream and an LPCM signal.

I think I understand that the bitstream is a digital copy (encoded?) of the signal, that the receiver decodes an processes, etc. Is the LPCM version the same digital signal via HDMI, just decoded by the player?

If this is true, then am I to assume that the PS3 (assuming latest firmware) will permit me to send a TrueHD AND a DTS-MA signal?

A buddy is building a system from scratch and he's considering paying the slight extra for the PS3, but I want to be sure that it is otherwise up to snuff. The addition of the gaming system certainly makes it a good value, but my fear is that there are hidden compromises (picture/sound quality) when viewing Blue Ray. Any comments?