From what I understand about the PS3 Slim, is that it can go from bitstreaming to secondary audio mixed into decoded PCM without a full HDMI handshake, which results in a less than one second blip in the audio, and no disturbance to the video.
Another issue with bitstreaming is many receivers have limitations when it comes to the lossless codecs. While they do have support for them, they can't apply their full room correction, falling back to distance and level only. This is becoming less common as manufacturers are using faster DSP chips. Another issue which shows up, is receiver limited Dolby Prologic IIx to PCM and Dolby sound tracks, where if you want 7.1 from a DTS you must use Neo:6. So by decoding DTS into PCM first the receiver never knows and can't tell you what to do.
I was listening to Bjork's Post album from the "Surrounded" box set last night. I usually use my Pioneer DVD player for music (it's easier to control with the TV off than the PS3). This player wants to bitstream by default, so playing the 5.1 DTS track of this disc had my receiver go into Neo:6. That made many of the songs with Bjork's voice centered in the surround channels end up heavily mixed on the back speakers. Those are the weakest speakers in my system. Neo:6 Music is available from a 2 channel source, but with 5.1 all I can get is a dematrixing of the surrounds. I found my receiver doesn't limit me to Neo though, it only defaults there. So I had my display showing "DTS+Prologic IIx Music", that was neat, and got me the mix which I perfered, with heavier use of the surrounds, with less emphasis on the backs. But with PCM decoding, I would have gotten the same Prologic IIx Music which I had set with the previous two-channel CD I had played.
