Is this the case with a digital input or an analog input, or both?
I have my CD input configured to use a digital input, but I did connect the analog inputs too, and I have the 5.1 outs of my DVD/CD player (a Denon 2910) going into the 7.1 inputs. I've found that the 7.1 inputs don't have double bass in any configuration when speakers are set to large, even if the sub is set to LFE+R/L. It really does seem to be a direct bypass, unless you set the speakers to small in which case the bass management kicks in so the sub gets a signal. Which is what you'd want if you have your speakers set to small of course.
And, like you, I found that, at least on the optical input, I do get double bass unless I go to bypass mode, where even though the sub is set to LFE+R/L, there is no signal to the sub.
For what it's worth, this setup lets me compare the DACs in the 990 with those of the 2910, by switching between bypass mode on the digital CD input and 7.1 inputs. And I find that both DACs are really good. It's going to take a lot of listening to see which I like better, but since I actually prefer to have the sub helping out with the lower bass, I generally will be listening to stereo or upsample mode on the digital input.
I have Paradigm studio reference 40s in front, and the specs say they go down to 59 hz at -2 db, and about 40 hz at -3 db. I've tried setting speakers to small and the crossover at 40, or 60, and I prefer the sound with the speakers set large, with bass from the sub by setting the sub to LFE+R/L. It seems the Paradigms just sound better with a full range signal. Bypass mode, of course, takes the sub out of the picture.
It surprises me, though, that the sub would still get a signal if you have it set to LFE only. Seems like there should be a difference in stereo and upsample modes between having the sub set to LFE only and LFE+L/R. That way, you could choose whether to have the double bass in the stereo or upsample modes.
I hope I stated clearly what I did. I'm still trying out all these settings. I think I'm going to have to make a chart so I can remember what happens with each of them. Also, I'm wondering if I can get my preferred double bass on the 7.1 input when listening to SACDs and DVD-audios. Perhaps I have to set it that way on the Denon, if I'm sure the digital output is still direct without speaker settings applied, so that I'm still using straight signal from the Denon when listening to regular CDs, and applying the 990 settings, and using the speaker setup in the Denon when listening to SACDs.
It's nice to have so many options, isn't it?
Mark