Thanks Bond. I really appreciate you answering this so quickly.
Just to be clear, you are saying let it fly on Bitstream from the PS3 and count on the higher end chips in the NAD 777 to do the heavy lifting ( although in the end the difference will be minimal).
This is all a short term fix until I get a decent Blu-Ray / CD player, but for now since I've blown my budget I need to make it work.
Any thoughts on setting the audio output format from the PS3? The choice is either "auto" or "manual" With the manual option, what I've done is just go in to the PS3 menu and make sure every single audio output option has a check mark. There are tons of PCM options in there and I just check off all of them.
Is this ideal or is there a better way to set the Audio output from the PS3 that will get the most out of this receiver?