If you want the AV Receiver to perform the decoding, then you should set the player to output bitstream. Bitstreaming = sending raw data straight from the disc to be decoded externally i.e. by your AV Receiver. By setting the player to LPCM, the player is doing the decoding. LPCM is basically the language that the receiver understands.
Have you set 'Secondary Audio' to OFF? I'll bet this is what is not set correctly.
Bluray has audio limitations whereby on certain disc's features e.g. P.I.P. and audio commentary (in other words, most of the stuff, that no one really cares about), you need to set the player to do the decoding as it cannot be bitstreamed. Blame Sony et al for this and the various other confusing profile issues but rest assured if you set the player to output LPCM and you have selected the HD audio soundtrack at the menu you are hearing the HD audio soundtrack, it's just the AV Receiver does not know what audio format it is as it is receiving the only language it can undertand which is LPCM. Decoding is simply 'unzipping' and although some people maintain that they can tell the difference, I personally think that it simply differing volume levels and it doesn't really matter where the decoding is done.
Also make sure your AV receiver is set to AFD so that it automatically decodes what is received.