BUT now that I have listened to more HD 5.1 audio I can say that the lack of rear surrounds is HUGE. The whole back of the theater seems "dead" without them, sound travels from the fronts to the sides and then nothing behind, almost seems like all of the sound is coming from the front and no surround present. Switching to dolby digital 5.1 and adding 7.1 post processing makes the entire soundfield come alive and envelope the listener like it should.
If you set up your system for 7.1 and the source material is 5.1, you should expect this result with the AV8003.
Think about what the mixdown engineer is using as his speaker position template.
A 5.1 source is expected to have surrounds behind and at approximately 120 degrees from the listening position. With 7.1, the surrounds are placed at 90 degrees, facing the listening position.
Since the AV8003 will not do post-processing to synthesize a surround back feed, you will have the rear channel information to your left and right sides, not behind you where the mixdown engineer placed it.
So if you are listening to 5.1 source material, having a 7.1 setup will definitely not be optimal.
What happens if you set up for 5.1 and the source material is 7.1 (or 6.1)?
Both Dolby and DTS fold the extra channels' into the rear surrounds. This approach works.
Does a 7.1 source sound as good in a 5.1 setup as it would sound in a 7.1 setup? In a small room, the differences would be minimal but probably noticeable. In a large room, there would be a larger difference.
What is the optimal solution? A 9.1 system! You have two pairs of surrounds, and a pair of surround back speakers. With 5.1 sources, you use only the 5.1 rear surrounds. With 7.1 sources, you use the side and back surrounds.
Note that to set this up, you need some way to switch the surrounds back and forth from sides (7.1) to rear (5.1). Denon has this feature built in.
To add this feature to a pre/pro like the AV8003, you would need to add a line level selector switch to choose which surrounds were active. Or you could use a speaker selector switch such as the Bryston, to switch between the two pairs of surrounds which would be connected to the same amp channels.
Note that you also need a pretty big room to accommodate 9 speakers (plus subs). Also note that you need at least 9 power amp channels.
Finally, please note that even with a pre/pro that can synthesize a 7.1 feed from a 5.1 source, you are not getting what the mixdown engineer is trying to deliver to you!
Tastes vary, so if you like what you get from a 5.1 mix synthesized up to a 7.1 mix, go for it. However, I suggest that you try setting up for 5.1 before you commit to 7.1 . A 5.1 mix with proper 5.1 speaker placement can be very compelling.