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I was wondering if anyone out there uses a multichannel preamp or av receiver and can confirm my observations:

The "Digital Stereo" option to downmix within the dashboard just seems awful. Apparently the Xbox 360 assumes you have less than full range speakers and just throws out the LFE while leaving in the highpass filter.

You can verify this easily in most games by trying both the PCM output (Digital Stereo) and 5.1 AC3 (Dolby Digital) options in the dashboard.

The analog ouput seems to be using the same downmix, making the only good option for stereo sound to be a multichannel preamp with its own dowmix DSP.
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