The general convention is to set all speakers to small and set the sub at 80 for the crossover. You can tweak the crossover to personal preference. You don't lose any LFE or signal, the sub simply does the heavy lifting. Plug it into "SUB".
As far as "Direct Stereo" is concerned, it varies by model & manufacturer. For my Denon 3803, "Pure Direct" is the stereo mode and it shuts down everything, including the sub, except for the two fronts.
Sounds like it might be worthwhile to crack your receiver manual & see if there is some specific info related to your questions.
