Which one is better? It all depends on the quality of the chips and circuits in the player and the receiver. The difference between PCM and bitsreaming is minimal (mostly volume difference). In most cases, the D/A chip may have more of an effect on sound quality. Practically, there are several reasons why setting the player to LPCM may be preferred:
Some receivers do not have enough processing power. If you set the player to bitstream, the receiver will have to decode the compressed audio and as a result the receiver will not have enough processing power left to do other things. Some receivers may turn off the calibration program such as Audyssey.
In the case of SACD, if the player is set to bitstream audio in SACD's native format (DSD), the receiver may not be able to perform Bass Management.
Another downside to sending the HD audio codecs in bitstream is that on many players, you can only send the movie soundtrack itself. Any secondary content, like menu beeps or the audio that accompanies Picture-in-Picture interactive features is not part of the original bitstream and will not be transmitted. See the section above.
For some players such as the Oppo BD83 player, if you turn the Secondary Audio to On in its menu, it will automatically set the audio to lossy DD or DTS.
