Denon AVR-3803 and Sony S550

[Eldorado]

I got two blu-rays this week. the S350 for upstairs, connected to my "old" Sony thru the only HDMI output on it and optical cable to my old receiver. No questions there. Wondrful sound and picture for the setting (my family room).

I connected the S550 to my Denon AVR-3803 receiver and my Sharp DLP projector XV-Z9000U on my home theater. The picture is 720p, crystal clear.
The sound...

I don't have HDM on mhy receiver or projector, so the only choice is component for the video and 5.1 analog for audio.
I connected all six cables to the ext.in of the Denon, switched it to the Ext.in input, boosted the subwoofer output to +15 db for the ext.in and I got beautiful sound with good bass, much better than what the old optical cable for the DVD player used to give me.

So, these are my questions:

I calibrated the sound level of the speakers using my Radio Shack SPL meter, using the test tones from the Denon. I noticed the Blu-ray also has test tones. Does it make a difference which one I use? I believe using both is not a good idea. Same question applies to the speaker size (which is defaulted to large in the Blu-ray) and distance to the listening position. I set both parameters on the Denon and left the Sony on default. The only change I made on the Sony was deleting the surround back speakers. What's the best way to do it:
Receiver or Blu-ray?

Also, the Dolby Digital and the DTS are set to downmix PCM, and they seems to sound better than set to DD and DTS. Am I going with the consensus here?

The audio DRC is set to wide range, is that good, bad, indifferent?