First of all, this setting will only affect the analog audio out, so if you arer just using digital coax, or digital optical, it doesn't matter.
OK I am using both, I am sending digital optical to my home theater reciever, which sounds great. However my HDTV also has a built in dolby processor with 5.1 outputs, and I am sending the analog inputs to it so I am in effect running two surround sound systems simultaneously....11 speakers (only running one subwoofer....nothing hooked up to the sub output on TV)....anyway for my uses...the TV compression seems to sound the best on the TV 5.1 system......no compression seem to overdrive it even at low volumes