Obviously for home theater applications, your system should be able to reproduce 20Hz (or lower) for maximum effect. In order to get the full benefit of your AV receiver’s internal crossover, if you have a subwoofer your front (left, center, right) speakers should be set to ‘small’ – regardless of their capabilities. With smaller speakers this will results in better overall response from the speakers as they are able to work solely with the mid-range energy and up, letting the subwoofer handle the low frequencies. If you don’t have a subwoofer, the fronts should be set to ‘large.’
If you have towers, or speakers capable of easily handling the full audio spectrum, set your fronts to ‘large’ and set the internal crossover to “LFE + Main” (or similar setting depending on your receiver). This will take advantage of your speaker’s full range capabilities with additional LF energy going to the subwoofer pre-out.
Satellites, rear-channel or any of the assorted other surround speakers should be set to ‘small.’ In extreme home theater setups this may change, but generally speaking this would be the default.
By setting your speakers correctly, you will get a better overall balance between the low frequency energy and the rest of the output. Frequencies below the crossover set point (anywhere between 100Hz and 40Hz) will go to your subwoofer (or subwoofers), and frequencies above the crossover setpoint will go to the fronts (or rears, etc.) eliminating the added burden to the speakers of handling the low frequency energy. For music applications you may want to experiment with a very low crossover setting (e.g. <60Hz), raising the crossover for movies (>60Hz).