All the PS3 is doing is unpacking the digitally compressed sound formats into LPCM. The D/A is being done (once) in the processor. Note that you have to use HDMI output on the PS3 if you want surround as toslink is limited to 2 channel PCM.
lpcm or bitstream for bluray?
I own a PS3 and have a Cary Cinema 11a on order. I know that the PS3 will decodes hd audio internally and sends it out as lpcm and will not send out bitstream.. Does this mean that the PS3 is sending an anolog signal or is the reciever doing the d/a conversion? Would there be any advantage to using a player that outputs bitstream? How many d/a or a/d conversions are actually taking place?