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1) So if I use *.mp4, I will not get 5.1 sound ? Also, the Blu-ray mode outputs a folder, is the *.m2ts file inside it ? If so, I can just copy that file to Ps3 and everything will be ok ?
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PS3 probably still downmix to 2.0. ( I haven't checked that with latest firmware ...)
If you don't care about final size use CQ@22 otherwise if you are going to fit your movie on DVD then you must use 2-pass!