No the Sony amp defintely can cope with Dolby Digital. It has no problem
whatsoever with my DVD (all 5 or 6 that have been hooked up to it in the
past) player. It works fine with my PS3.
The only thing it doesn't like is Dolby Pro Logic II.

It will play the spdif'd files but just in stereo. However for some of
the test files I downloaded from Kelly Ind etc, it will either not make
any sound, but light the surround light and display DD5.1 on it's
display or play stereo sound.


Maybe I'll need to wait until the HDMI amps come down in price before
buying a new one. The top of the range Sony amp(
http://www.sony.co.uk/view/ShowProduct.action?product=STR-DA5300ES&site=odw_en_GB&pageType=Overview&imageType=Main&category=HCS+Home+Cinema+Receiver
) has got very good reviews. I'm not looking for audiophile quality, but
it does have to be flexible connection-wise.


-- 
oreillymj
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