The TX-DS797's multichannel analog input is going to be a pass-through with no bass management, no speaker delays, and very possibly no channel trim. Have you calibrated the S550 so that it is providing these? Another thing that I wonder about: how does the system sound when you compare the coaxial output to the analog output with a Dolby Digital or DTS track? In other words, what happens when you watch a standard DVD on the S550 and switch between the coaxial and analog connections? After all, if the Onkyo's DAC's and analog section are noticeably better than the S550's, that may contribute to the situation you are describing.

As for the 997, I would expect several differences. First, my experience with the 990 makes me suspect that the 997 is going to sound better than the Onkyo 797 does. That will be true for all inputs. Second, the Sony S550's analog section will no longer be a factor, as it will send the audio as either an undecoded bitstream or decoded LPCM digital audio.

I haven't been able to do a comparison such as what is discussed in the article you linked to, but the basic theory is sound: the whole point of lossless compression such as TrueHD and DTS-HD Master Audio was to provide access to the original uncompressed studio masters while still avoiding the need to stick six or eight channels of uncompressed audio onto a disc. If TrueHD and DTS-HD MA are doing their jobs properly, they are just as non-destructive as PKZIP is to computer files - unpack them back into the original PCM, and you have lost nothing.