I can imagine that one problem with allowing PLIIx processing on the 7.1 direct input is identifying when only 5.1 channels are present. You could monitor the inputs, but even a 7.1 source would have passages of silence on the surround backs.

If you want to use the HD-A1's DAC's for CD listening, you can do two things. One is to run the stereo analog outputs to the CD input and set that input to bypass. If you use the CD input and the bypass mode, the mains will get a full-range signal (since we're in analog bypass at that point) - but if the mains are set to small, a copy will go to the sub as well. The other is to use the 7.1 input for CD's as well as HD-DVD's, assuming the HD-A1 doesn't do any processing to it.