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Every Blu-Ray player will output surround sound. Depends on what you're connecting it that puts out the sound. Dolby Digital & DTS surround can be output from every Blu-Ray player through it's coaxial, optical, HDMI or 5.1/7.1 analog outs. Advanced audio tracks like DTS-HD, TrueHD and also PCM uncompressed need either the HDMI or analog outs and a receiver with the same inputs. The PS3 does not have the analog outs (which is what you may have read), but it will certainly output all the advanced signals via it's HDMI jack and optical out for regular DD & DTS. Also, the PS3 is the only player that currently has built-in decoding for some advanced codecs and also has HDMI 1.3, so it's actually better than most of the standalones, especially at that price point.

Firmware is like a program that updates your machine. It can be done by inserting a special CD you can burn yourself or have the company send you. Some machines with network jacks will be able to do it over the internet as well. The firmware is released to fix problems/incompatibilies that may pop up, as well as add features to your player (like more advanced audio capabilities).