My Denon reads pcm over the optical inputs. Are you saying that although it says it is doing that it can't? Is it possible that it can but not at the higher bit rates acheived by the new Lossless codecs?
Also, I thought that if you use the analog inputs on your receiver you by-pass your reciever's decoding circuitry and go straight to the speakers with only the speaker control of your receiver being used. That is how my Denon3910 DVD player works with my Denon avr-982 (an old receiver -- I am waiting for the new HDMI 1.3 receivers next year). The 3910 has much better codecs and sounds terrific when I use the analog inputs. I thought that this was how Toshiba was passing their sound thru to the speakers thru the analog out. Maybe the upgrade from Toshiba was for the HDMI output and not the optical.
But now I am confused, I have read about the new Toshiba's and I have read that the new $499 product will not have analog out included. Just HDMI and optical. I could be mixing up the two new units but if I am right this really puts a hurt on using any consoles HD player for HD movie viewing as the sound will be limiting. That is the reason I like the PS3 with HDMI 1.3. I can purchase a HDMI 1.3 receiver early next year (hopefully by March) and I will be able to hear any lossless codec on the movie disc.
Now that brings up another question, if what has been reported is right, the PS3 not only decodes DolbyTrue HD but also DTS HD! If so can this be passed thru the HDMI to current HDMI receivers? Questions, questions, questions!