Rat,
Exactly. The 1/8th power rating isn't enough for some types of multichannel music and lots of soundtracks. But it's unlikely lots of listeners in average rooms would detect brief clipping on movie soundtracks where there is a lot going on. You could certainly hear the clipping with a test signal, but studies years ago pointed out that amplifier distortion using music as a source has to get really nasty--into whole percentages--before it becomes audible. With a lab test signal, it becomes audible at much lower levels.
The dilution of power output ratings for multichannel receivers was simply market-driven. If a manufacturer had to include power supplies for a 7.1 channel A/V receiver that would meet the original FTC power output specs for stereo receivers, it could not be manufacturered or sold at an affordable price.
In many scenarios, the current power-rating requirements, while misleading for consumers, are a reasonable compromise to making 7.1-channel receivers affordable to a large market. But there are real limitations in terms of power output. Many brands simply won't drive lower impedances (4-ohm speakers) at all and of those that will, you can't put them into huge rooms and expect them to produce high SPLs without overheating or clipping or shutting down.
Regards,
