Dirtydan - There is no TrueHD indicator on the A35. It does have an HDMI indicator that will light, I believe, when the "handshake" over HDMI is acknowledged, but that does not give any indication of what audio format is being sent, the "lossless" bit stream or other PCM.
The TrueHD light to which I referred is on the Sony receiver. From what I can tell, that one will only light when it is receiving the bitstream representing the lossless TrueHD track on the disk. (If it was receiving DTS HD MA bitstream, there is a separate light for that.) I only got that TrueHD to light on the receiver after I had correctly set both settings in the A35 and the TrueHD setting in the movie audio set-up, as you suggested. As soon as the unit completely reset itself the display on the Sony briefly showed "Dolby TrueHD" and that smaller light came on. Then the display went to other information, as it always does, but the small light remained illuminated throughout the movie until after the credits. (It switched back to DD when the selection menu reappeared.) That same display always showed "Linear PCM: 48KHz" for any setting with the A2. For the A35 it initially said "Dolby Digital +", and the separate small light for DD+ also came on and remained on. So the receiver is sensing different forms of digital input. I'm just trying to understand the difference.
From the replies above, every digital signal including one designated as "lossless" is some form of PCM, but apparently at varying bitrates. The link I provided does point out that the other renderings are "lossy" in terms of what material is not provided by the person engineering the mix, but that the "lossless" bitstream should be the full audio track from the film maker. Indeed, both players can decode the TrueHD bitstream internally, but what then is the output result? I contend that the 5.1 (or 7.1 for BD) analog signals should, or at least could, be the D/A converted lossless signal that can be sent to a receiver or pre-amp, whatever, and the A35 has the 5.1 analog outputs. (Those signals would be subject to whatever noise or interference degradation that could be picked up in audio cables, but otherwise should be "whole".) But the PCM signal that's being sent over HDMI from the A2 or A35 that's not the "lossless" bitstream - how is that different from the "higher quality" signal? Apparently there is a bitrate difference that the TrueHD signal (and even the DD+ signal IIRC) require the higher bandwidth 1.3 protocol. If there is no difference, why have both? That's my dilemma, and if the answer is contained in the posts above then I am still confused. No audiophile here, and perhaps not one capable of understanding this technology either...!
But the quest continues...