AFAIK Dolby TrueHD(it has 7.1 channel Dolby option in Speaker settings and Dolby digital is only 5.1) can be done directly, however not sure about DTS-HD (i think it can too).
BUT if you are using SPDIF out from PS3 to Z5500 , the question of decode does not arise, because the Z5500 is dolby digital capable, and he will not be able to take advantage of 7.1 channel audio.
I dunno, but if the Creative GigaWorks S750 also has SPDIF, he can consider it.
Nope the z5500 cannot decode DTS-HD directly. You need to have an extra hardware that can do it and channel to the speakers. AVR's and PC soundcards(including motherboard onboard audio) are the only devices that can do it.
Simply put. SPDIF or optical toslink or coaxial cables do not have the bandwidth to carry DTS-HD & Dolby TrueHD.If you connect your Blu-ray player to your receiver with optical or coax, the audio will "fall back" to Dolby Digital, DTS or two-channel PCM (lossless, but only two channels).
Here HDMI connectivity is need and even previous 1.0 standard will suffice. Thus the dire need of an AVR arises. Simply a z5500 will not be enough here.
Dolby TrueHD & DTS-HD codecs can pack 8 channels of lossless audio. Each channel has 24 bits having a sampling rate of 96khz.This sampling frequency is twice the 48 kHz standard commonly used with audio on professional video equipment.
Getting down to the basics, sampling is nothing but conversion of a continuous analog signal into a discrete digital signal by taking number of samples per unit time. The
Nyquist shannon theorem suggests that in order to recreate a perfect and lossless discrete signal from a continuous analog signal, the sampling frequency should be twice than that of the original frequency of the continuous signal being sampled. If lower sampling rates are used, then there will be considerable loss as the original signal wont be recovered.
*i56.tinypic.com/jg1axc.png
Now DTS-HD has a 96khz/24bit resolutions that equates to 281.25kbps and SPDIF maximum supports 48khz sampling rate with a resolution of 24bits that equates to 140.62Kbps.
Note that the above represent bandwidth per channel.
Spdif supports only 2 channels whereas DTS-HD has 8 channels. So simply put spdif will be a huge bottleneck while transmitting DTS-HD or DOLBY TRUEHD.
Therefore connecting Z5500 to ps3 will result in two channel output along with reduced lossy bandwidth due to the above mentioned reasons.
So an AVR is absolutely required in this scenario.
