Wouldn't having your sub set to 120 pickup a lot of midrange and highs
No, that's only the second bass octave. 40-80Hz approximately the first octave (low bass), 80-160 approx. is mid-bass. Highs are way up in the kHz region.
If I set the sub to 120hz, will I be causing cancellation between the overlap of 80-120hz?
No, there will be no cancellation. The key thing to understand is that the LFE channel is not the same thing as the "subwoofer channel". The LFE channel is a discrete low-frequency effect channel that ONLY goes to the subwoofer. Even if you have a "double bass" setting on the receiver, the LFE only goes to the subwoofer.
The subwoofer gets two types of signals -- the LFE track, and any redirected/doubled bass from the main channels. So let's take a simple 2.1 setup. If you set your fronts to "large" and put "double bass" on, your fronts will play the full range, and the subwoofer will double up the bass that the speakers are playing. That's where the possibility of phase cancellation comes into play. This is "redirected" bass from the main speakers. Plus, the subwoofer will play the dedicated LFE channel, but that part only goes to the sub.
Again, the LFE track ONLY goes to the subwoofer, ever. The LFE track starts rolling off above 80Hz, and then has a hard cap of 120Hz. If you set the LPF for the LFE to 80Hz, you are cutting off the LFE channel above 80Hz, and losing information because it doesn't go anywhere else! It isn't a "cross over" so that information from 80-120 isn't redirected anywhere, it just disappears.... thus, there is nothing to cancel!
So while the THX standard recommendation of 80Hz all around applies to all the actual crossovers, and is a good rule of thumb for most systems, it is important to understand that the LPF setting for the LFE is NOT part of this "bass management" system and you should just set to 120Hz, or you will not be hearing the full LFE channel.
Here's a good article, if you google "LFE channel" you get lots of interesting info:http://www.hometheaterhifi.com/volum...pril-2000.html