7.1 channel output vs. Coaxial digital

Ideally, you want to do both, especially if your Bluray player internally decodes the new hi rez codecs available on Bluray,that being Dolby True HD, and DTS Master Audio.There are still very few pre/pros on the market that can receive and decode these new codecs in the digital domain, so the only way to take advantage of their superior sound quality is through discrete 5.1 or 7.1 analogue outputs of your Bluray player to the multi-channel analogue pass through inputs on your pre/pro. The same will go for SACD, or DVD-Audio if you choose to utilize these formats. Even the uncompressed PCM multi-channel soundtracks that are on some of the early Bluray discs will need to be output through the multi-channel analogue connections. As far as standard Dolby Digital, or DTS soundtracks on regular DVD or Bluray discs then yes a digital coax connection is probably the best way to go. Surprisingly there are still relatively few Bluray players that are fully capable of decoding and outputting the new hi-rez audio formats ,though that is starting to change.

If your preamp is capable of passing through analog without A/D conversion, it may be beneficial to use 7.1 analog, since coaxial will downgrade 7.1 lossless to either 2.0 lossless, or 5.1 DD/DTS. I assume your player could handle decent bass management.

Depends on the BD player. I use 7.1 analog from my Oppo BDP-83, for DD/DTS 5.1 as well as TrueHD/DTS HD Master 7.1. The AQ is much superior than the S/PDIF coax connection. I have also noticed that the output signal voltage is higher on the analog 7.1 out than on the coax, since you can adjust the sound trim level coming out of the BDP. You should compare the two and see which one sounds better on your BD player.

The Oppo not released yet...what do u think of it since you r lucky to get a pre-released unit. Thanks.

Im using my player to do decoding for the true hd dts and then analogue outs to preamp sounds best for me. (elite bdp-05 )

The new true hd sound is amazing when done right.
Always looking for that well engineered soundtrack that takes advantage of the new formats.
Rent Valkyre in bluray and experiment with cables. It's an example of great use of the format, but only in the beginning of the film. The movie begins with an "African front scene" that immediately grabs your attention with great true hd sound. Plane attacks sounds are great. But unfortunately the rest of the movie was filmed first and does not sound as good.

Jcbower, sorry for not responding earlier. I have been very pleased with the Oppo. Blu Ray/HD audio performance is exceptional. There were still a few issues with SACD/DVDA which have now been fixed with the latest firmware release. It is now available for direct purchase for $499 - the best bargain in HiFi AV right now.