Thanks for the quick and helpful response.
So when I'm in "direct" mode, is it still using dolby digital compression and just bypassing sound processing of my receiver, or is it somehow getting the audio via a different higher quality transport? Is this something I would want to use for watching movies?
And it sounds like straight is the mode I want to be in if I'm not in direct mode and I want to bypass all those cheesy "Concert hall in Beirut", "Bomb Shelter" movie/music presets?
This seems to make sense now.
For anyone considering this receiver, I'm quite happy with it. It's not exceptionally loud. I'm using it to power two Polk TSI300s and a Polk CS10. I'm using my old Aiwa fronts as the rear speakers. It sounds absolutely fantastic, especially after using the microphone it comes with to automagically calibrate my speakers. It was a steal at around $300.