Onkyo TX-NR595 Second Zone for HDMI

I just ordered the Onkyo 595 from Costco. One of the main reason for choosing this receiver is for the 2nd zone HDMI out.
I have a home theater room adjacent to a family room which also has a TV. I share all of the equipment in the home theater with the TV in the family room, so that I don't have to have a second Tivo, Blu ray player, etc.

In the manual, it says that the audio for hdmi 2nd zone only works if the output is PCM, which i am OK with. Does it mean you have to have the source output in PCM or will it automatically take 5.1 and convert to 2 ch pcm?

I wanted to see what have been other's people experience with using the second zone HDMI out feature otherwise.

This also has second zone pre-out and speaker line out. If you hook up the pre out with something with power, like a soundbar or powered speakers, would you essentially have 4 zones albeit only 2 at a time (1 main + 3 second zones)?