Cvinfig's got it right - the 7.1 Direct input is for any multichannel audio source that can't be carried by a coaxial or optical digital connection. When the 1070 manual was written, that was DVD-Audio and SACD (HD-DVD was still almost a year away from launch, and Blu-ray farther off still), but you'll want to use the multichannel analog connection for the new HD-DVD/Blu-ray audio formats for the very same reasons that you want to use them for DVD-A and SACD.