wingrunr21 wrote:If that is so then that means that every HD-DVD player is downmixing the E-AC3 stream to an AC3 audio stream since there are virtually no HDMI 1.3 devices available yet.
No. The player decodes the e-ac3 track in software and sends the decoded audio directly to the speakers via analog line-out, just like with any other audio format. Downmixing (or rather reencoding) only comes into play if you have an external hardware ac3 decoder and send it data over S/PDIF.
wingrunr21 wrote:How much more room would a regular AC3 track take up? Would people honestly know the difference? Probably not.
No person will ever notice the difference between regular ac3 and e-ac3, unless they have an expensive professional 7.1 audio setup. If anyone claims otherwise, then it's just placebo effect or a delusion.