God, you think you've read everything before you make your purchase, and then something else comes along that you missed. I've been reading some reviews of the HD-XA2, and found out that the player itself decodes Dolby Digital Plus and TrueHD, and then sends them as multichannel linear PCM via HDMI, or analog signals via multichannel outputs. That being said, does this mean a reduction in audio quality? Does TrueHD go from being "lossless" to "lossy" in this process? Are there any steps being taken by Toshiba to possibly update the firmware to remove this feature, considering that HDMI 1.3-capable receivers are starting to appear on the market? Any info is appreciated. Thanks!

Dolby TrueHD is lossless. PCM is lossless. If the conversion is done correctly, the audio will not suffer any loss of quality.

I don't think there are any receivers currently available that can decode these formats (there are very few if they are out there), so this is not a feature that Toshiba should ever remove. There should not be any degradation from the player decoding the soundtrack and passing it as PCM. Additionally, I believe the Toshiba players can pass the sound as a bitstream over HDMI, so that future receivers will be able to carry out the decoding if you wish. Your XA2 even has analog outs for people that don't have HDMI receivers. This is something they've handled quite well.

The new Onkyo line of receivers can decode the bitstream Dolby TrueHD or DTS-HD MA signals, but AFAIK, none of the current players can send the lossless data as a bitstream signal, making it necessary to decode to PCM first anyway.

PCM is lossless. Did you not google this?

The HD DVD spec requires that all discs authored in "Advanced" mode (which to date has been all of them) have DD+, TrueHD, and DTS-HD audio decoded inside the player, so that menu beeps and PiP interactive audio can be mixed in. The player will never transmit a raw bitstream to a receiver for decoding.