I know there has been much back and forth regarding the player doing the decoding or the receiver doing the decoding. However I would like to preface this question with this comment.

When you look at all of the myriad of issues regarding proper playback and getting the best sound, many folks have completely overlook the most important component chasing after minor benefits. Proper room acoustics play a far larger role in getting better performance than something as small as which component does the decoding. The arguement for which sounds better (if it actually does) belongs in the studio(which acoustics are tightly controlled) or in the upper 5-10% of the folks who actually have their room properly treated based on acoustical measurements. To actually answer the question of which is better, the answer is neither has any sonic benefits over the other. I will explain.

When the player does the decoding(or transcoding), the process of transcoding is lossless. In other words nothing is lost converting the bitstream to PCM to send to your receiver. All PIP audio will be mixed in along with the program audio, and the user has access to the audio of all interactive and program material. Whether you choose to do bass management and speaker alignment in the player, or the pcm audio is sent to the receiver for these functions, they are done in PCM because that is how the DSP chips function, is with PCM signals. So no matter which way you turn, the audio will have to be converted.

If the player passes the audio to the receiver in bitstream form, the receiver will have to convert that bitstream to PCM for any bass mangement or speaker alignment to take place. That process is also lossless, and is much like we have seen with legacy Dolby Digital and Dts. The drawback is that no audio from PIP or any interactive material will be heard because this process bypasses the internal mixer of the player. So no matter which direction you choose, PCM conversion will have to take place whether the player does it, or the reciever does it. In the end, there is no sonic benefit that either has over the other, and why when looked at critically, the receiver doing it becomes a marketing ploy and nothing else.

I hope this dispels the confusion between the player doing the decoding, and the receiver doing the decoding. And then, maybe not.