For some reason, my receiver shows MPCM on the display when playing this game, but the game says it is Dolby Digital. When I play Ninja Gaiden, my receiver shows Dolby Digital. Anyone know why this is happening?

When I played this game on 360, my receiver showed Dolby Digital, and the sound was much better from what I remember, but I could be wrong.

what receiver and what type of connection?

My receiver shows mcpm on everything.

Yamaha RX-V661

By connection do you mean cable? HDMI to receiver, HDMI to TV. I put IIx Movie on for the rear.

It uses the best sound it can, and MPCM is better than Dolby.

if your audio output is set to "LPCM" instead of "bitstream", then it's going to read MPCM no matter what the soundtrack is. The PS3 decodes it and sends it to the receiver as Multi-channel PCM. If it really does have a DD sndtrck, then set it to "bitstream" and it should read as DD.

Gotcha.. but it's still being rendered in all channels, thus it's actually better than the 360 sound? For some reason, it seemed like the sound was less impressive than the 360 version when I played it.

if your audio output is set to "LPCM" instead of "bitstream", then it's going to read MPCM no matter what the soundtrack is. The PS3 decodes it and sends it to the receiver as Multi-channel PCM. If it really does have a DD sndtrck, then set it to "bitstream" and it should read as DD.
There is no soundtrack to decode in a game, the sound is generated dynamicly from samples. The LPCM/bitstream options are for Blu-ray movies, not games; and besides, Dolby Digital is lower quality than PCM either way.