yep rp2000 gave me some help on where to get stuff online, cheers dude
The weird thing is yes ive been using PCM as default
but i'm 100% sure its been DD5.1 Definately not stereo anyway. Watched Fellowship of the Rings and Two Towers on ps3 (brilliant graphics heh) and the Music/sound effects are great definately feels like 5.1 surround. (and not simulated either).
Even weirder though...possibly it was my imagination but Bitstream might be of LESS quality (uncompressed but only 2 channels CMIIW) whereas PCM is compressed but with more channels?) I'm not an expert though. When i get home i'll mess about with the settings and see if i can hear any difference between the two. I agree that setting it to PCM means the ps3 has to do the decoding but are you sure that means NO DD5.1? It says DD5.1 on my player and it sure sounds like it.
Oh and yeah using optical output to httx30r
Forgive me if I'm wrong.... the Hifi forums are better for this sort of thing.
I only tried the settings once, ages ago when I first got a 5.1 system, using a DVD player, and have set up each subsequent player the same way since.
From what I understand, bitstream output is just that. It does nothing to the sound whatsoever, and reads it, and sends it straight out through the optical cable. This is what you want if you have a disk with DD5.1 or DTS on it, and your amp can decode DD5.1 and DTS.
If you didn't have an amp that can do DD5.1 or DTS, you'd set the output to PCM, so that the player (or in this case, PS3) would decode the stream into something that doesn't need a decoder.
In this case, on my amp, selecting PCM (on the player) as an output, it reports it's receiving a stereo signal, which in turn, my amp outputs as prologic (going by the display)
If you had a disk with only DTS sound on (which I know is highly unlikely, unless it's a pirate, or a DTS music DVD) and you had a DD5.1 amp, but not DTS, then you'd select PCM out for the DTS, otherwise you'd hear nothing, as your amp couldn't decode it... or worse, you'd hear horrible white noise.
This is how I've always understood it anyway, as not selecting bitstream, means my amp doesn't run in 5.1 mode. In fact, with DVDs I've never used PCM mode at all, bitstream for 5.1 and DTS, and let the amp decode it.
PCM 7.1 though... to use PCM output

(so long as your amp can decode 7.1 via HDMI)
V1N.
EDIT: by the way, I did also pop around to a mates place, a year or two ago, when he said he didn't think the surround was working properly on his system, as DVDs were coming out in prologic. When I looked in his DVD player menus, sure enough, he had DD5.1 set as PCM, but DTS set as bitstream. DTS was working fine, DD5.1 not. Changed to bitstream, all works well. Did the same thing at my Step-Fathers place when he got the same DVD player as me, and a new amp.
EDIT2: I wonder if your PCM output doesn't sound better, because of some sound settings/processing? I only mention it, because for example, my DVD player has a graphic equalizer in it. It doesn't affect bitstream output at all of course, but, if I set PCM, I'm sure it would, allowing me to boost bass/treble etc. Perhaps that's why you prefer the sound when PCM is selected. I'd still check that your amp IS definitely running in DD5.1 mode though.