The speaker indicators on the front panel of the AVR indicate the channel signals it's receiving from your player, not which speakers are playing.
If you put a 5.1 movie in your PS3, you wont light up the rear lights on the AVR,
However you can expand 5.1 to 7.1 using any of the many extended surround decoders (like Dolby Pro Logic IIx) its in the manual.
There should be button on your remote for "Sur.Decode" , and no, it still wont light up the speaker light on the AVR.
official RX-V1800 thread here: http://www.avsforum.com/t/888942/the-official-yamaha-rx-v1800-rx-v3800-thread
if you didn't get a manual, you download one here: http://usa.yamaha.com/products/audio-visual/av-receivers-amps/rx/rx-v1800_black__u/?mode=model
The XBOX 360 doesn't have a bluray drive to decode 7.1 lossless audio tracks like the PS3 does
it only plays DVD's limited to 5.1 compressed audio tracks.
Edited by PioManiac - 11/16/12 at 7:50am