The SD220 does NOT have onboard decoding however as your buying an Amp/Reciever then you dont need it anyway ( for reference thats the difference between the 220 and 420 ). Personally I dont rate Sony kit and I dont know anyone who likes there speaker packages. If your budget can strech get a Yamaha(430, 530 etc ), Dennon (1602) or Marantz ( 4200, 4300 out iminently ) amp and some Mission M72 Cinema speakers - There the entry level thats is likey to last a reasonable time.
Just my 2 cents worth
G