OK, all of the sound enhancements of HDMI has NO effect on the games. The games are still going to use the same audio codecs as they've always used. They can't switch to new codecs because then there would be different read times for different games if the Elite 360 used them and the rest didn't. The Audio improvements will only work for the HD-DVD player.
Next, the reason M$ didn't use 1.3 is a couple of reasons. 1. At the time of devolpment, they didn't have access to the hardware and specs of HDMI 1.3 like Sony did. Sony is a founder of HDMI and M$ is only a partner using it, so Sony has had access to the specs before M$. Also, the 360 wasn't built internally to be able to utilize the advance audio signal transfer to the HDMI jack inside of the 360. So basically, the 360, as of now, is unable to utilize HDMI 1.3, even if it wanted to.
You can still get 7.1 surround sound with your HDMI 1.2. And in the spring update, they're supposed to be addressing alot of the Audio issues with the 360. As Zombie4Rav pointed out, it's the 360 itself that can't handle the PCM, hence, no need for HDMI 1.3.
If you want to see where I got all of this info, just go to the link that started this whole thread. In the AVS forums, if you continue reading Amirm's comments, he discusses all of this further into the AVS forums. He kept saying to wait until the Spring Update, that it was going to have some higher end sound improvements and they were also addressing some of the video problems people were having with various LCD TV's.