It won't be a show stopper for me if both HDMI outputs cannot be active simultaneously. My Denon AVP-A1 prepro does support this and I think it also offers different resolutions per output (but both of my display resolutions are identical so I'm not sure about this).

My HTPC does bitstream the FLAC format directly via HDMI (the AVP-A1 displays the input signal as such), and because the signal can be manipulated by the prepro's DSP, I'm pretty sure that FLAC>PCM conversion occurs internally. Marantz's AV7005 supports FLAC input, so I don't think it would be a stretch for the 978 to do so as well.