Axiom Home Page Forums General Discussion Home Theater Receiver decoding vs source decoding

I don't believe any of the HD sound formats can be sent through optical on any player.

Included within 7.1-channel multichannel Dolby Digital Plus and Dolby TrueHD streams is a core 5.1 mix prepared by the content maker that is used when the player is set for 5.1-channel mode. After playback audio signals have been mixed in the player, the PCM signal can be encoded to a Dolby Digital signal and output from the player via S/PDIF (optical or coaxial) to your connected Dolby Digital A/V receiver or processor.

In many instances, the audio quality you will experience from this connection may be better than what you would experience during playback of standard-definition DVD-Video discs, especially if the native signal on the disc is Dolby TrueHD or high-bit-rate Dolby Digital Plus. This is a direct result of a higher-quality source signal feeding a Dolby Digital encoder running at 640 kbps—higher than the maximum bit rate on DVD-Video.

I've been keeping an eye on PS3 for a blue ray player, so I can answer a couple of your questions.

PS3 can not send a DD True HD or DTS Master Audio stream to another component via any cable. It can decode these internally, and output them as PCM over HDMI (at 7.1 I believe).

It can bitstream undecoded 5.1 over HDMI for decoding by the reciever.

The optical audio can only do 5.1, including I believe decoded DD HD or DTS Master Audio, but can't say for certain

The PS3 doesn't have 5.1/7.1 analog audio outputs.

This is the best link I've found, which describes the current (April/May 2008) capabilities of the PS3.
What's on HDTV

Karlman