If the speakers are set to "large" the 990 leaves the 7.1 Direct inputs analog all the way through. If the speakers are set to "small" then the 990 converts the 7.1 Direct input to the digital domain and applies bass management only. Other processing is bypassed. Dolby IIx will work on Dolby Digital and DTS 5.1 sources, but the 7.1 direct input is a wholly different entity as far as the 990's processing is concerned.