Hi there, You may find many options and post appearing here and hopefully it won't get **** and snobby :-) The best answer is "whatever sounds good to you". Personally speaking : For DVD Movies, If you have a digital cable connected, the correct playback mode should be selected automatically be it THX,pro logic, the differnt ranges of dolby,DTS,etc. If not, check the dvd packaging. This should tell you the format/s in which the sound is recorded, then select this on your receiver. If for example you select a decoding system that it was not encoded in, the sound will sound unballanced and sometimes not all channels will work (with VCD for example). In my experience I have not come across many VCDs with multi channel encoding as they are only glorified CDs and storing video and multi channel audio is not going to viably fit onto such a small sized (70mb) disc as opposed to a DVD (4GB). I would recomend trying a simulated surround. the "NEO" settings are simulated versions for example. I tend to listen to standard stereo stuff in 2.1. (front mains and sub) and I use this for movies I have with no audio encryption. To me, in my space, all channel stereo sounds too busy and undefined. Some models have a 2.1 setting or a 2 channel stereo and will eith incorporate the sub if attached, or sometimes you need to turn it on via the remote or in the menu.
The 'best' audio result will always be subjective, but when it comes to digital multichannel content, the engineers probably had it right, so I'd go with Dolby Digital, THX for movies; and experiemnt with all the others for muical content becaasse any given audio recording can yield surprising new details when you turn DSP loose on it.
http://www.retrevo.com/support/Onkyo-TX-NR708-Receivers-manual/id/23693ag503/t/2/
See:
Page 25 Displaying Source Information
Page 36-41 Listening Modes
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