From the 607 Manual:
When the Audio TV Out setting is set to On, or
TV Control is set to On and you're listening
through your TV's speakers (see page 24), if you turn
up the AV receiver's volume control, the sound will be
output by the AV receiver's front left and right speakers.
The manuals for the 707/807 do not specifically state stereo output. Can anyone confirm that audio operates properly from the AVRs speakers while TV Audio Out is set to on?
For the 607, many of your basic Audio Modes(DTS, Dolby, MC PCM) aren't available and during Direct mode(and others) you only get .0 sound, subwoofer is not engaged.
I believe it is converting the sound to 2.0 for the TV.