Yes, HDMI 1.1 can do this, but check that your equipment supports it. One thing to be wary of is that many devices can't handle high-res multichannel audio (eg 5.1x96/24) over HDMI with standard-definition pictures - you may need to tell the player to upscale to 720p/1080i.
As to sound difference - it's the same basic argument as having a digital or analogue connection to a stereo CD player. It will depend on your particular equipment. The main advantage of the digital connection is usually that the receiver will be able to perform all its processing on the signal, rather than just passing it through. (time delays, bass management, room equalisation, Dolby Pro Logic IIx, etc).