BD 350 with Onkyo 606 and Onkyo HT540

[dragonmaster]

Hello Guys,
I am trying to set up a home theater system and have read lot of threads around the one which will fit my budget. I am looking for approx 800 USD setup. I already have a Sony Bravia 42" LCD TV.

BD Player - 350 vs PS3 vs 550? I was leaning towards PS3 but negatives i read about are fan nosie while upscaling normal DVD's, inability to bitstream certain HD codecs (not sure if this is a problem with a Onkyo 606 receiver). I dont really understand the issue with bitstreaming vs decoding by the receiver. Is the fan nosie issue still present in latest PS3 devices?

If not for PS3. then i guess 350 would be a better choice given the prices since both 350 and 550 are BD Live 2.0 compatible and analog sound is not an issue.

I am pretty much convinced with Onkyo 606 against Sony DTR 820 but wasn't very sure about the 7.1 speaker setup. Is the HT540 from Onkyo good enough or should i look for something else?