You only need to use bass management in one of the units, setting the 2900 to large speakers should turn off bass management from that unit. I would hook up the LFE as there are LFE tracks on multichannel audio. Although a setting on the 2900 for large speakers / sub off should put the lfe track to the rest of the speakers, not sure as I don't have a 2900. I would hook up the LFE and set the speakers to large and the sub to on for the 2900. Unless you don't have a sub.
The less digital/analog conversion the better.
I don't know if the Yamaha applies the bass management in the digital domain or not for the analog inputs.
The less digital/analog conversion the better.