I've been researching this a while and tried lots of different combinations of settings. I will post some steps below to help Mac users get 5.1 audio on their PS3s with little effort. PC users could probably use the same methods described below but with programs developed for the PC.
1. You first need to decode your source material. If you want to backup and convert DVDs you own and save them on your Mac for viewing on your PS3, begin with a program such as Mac the Ripper and demux the audio and video into 2 separate streams. For most of your DVDs you can do this without a problem. After analyzing your disc click the mode tab and choose "demux", then click the streams you wish to demux. In most cases i just chose the video file and the 6 channel english audio file. The audio files are labeled for easily identifying which stream you want to use. After the program demuxes you will have a folder that contains a .m2v and your AC3 audio file.
2. Next you will need FFMPEGX to bring the separate streams back together into one container (muxing). Open the FFMPEGX program and choose the "Tools" tab. Select the "video" button and choose the newly created .m2v from step 1, then select the audio 1 button and choose the AC3 file that was created from step 1. Under options Mux as: DVD, Author as DVD (VIDEO_TS) should be checked. The split mpg should be unchecked.
3. In FFMPEGX After the file is done muxing, choose the "summary" tab and drag the newly created .mpg file into the "From" drag and drop area. It will show your Video and Audio files. For Audio it should show a 5 channel audio stream.
4. Next select the Video tab in FFMPEGX and choose MPEG4 [.AVI] (ffmpeg). For now leave the settings untouched. You can go back and mess around later if you want to create a higher quality video. Then select the Audio tab and under Audio Codec choose "Passthrough". Audio Parameters should be set to Audio bitrate: 448 kbit/s, Sampling: 48000 Hz, Channels: 5.1, Mode: CBR.
5. Click Encode. When it's done you will have a file ready to stream to your PS3 with video and 5.1 audio.
I am using a dual core 2.8 ghz iMac, Mac OS 10.5.4 to prepare the files. To stream audio and video to my PS3 I am using MediaLink which is a great program and works really well as a media server. Lastly I have my PS3 hooked up to my 1080p TV with an HDMI cable and the audio going to an Onkyo receiver via a Toslink cable.
I really hope this help some of you out there who were having trouble with this. I only had one of my DVDs give me a problem but I believe there was a problem with the audio source on the disc. All other tests have worked flawlessly.
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