We use a mixture of compressed and uncompressed, but lots were compressed for the reasons people have stated.If I remember it correctly DeanoC said they where using a SPU dedicated to MP3 and audio-mixing. I doubt they are using uncompressed audio on this title.
Make no doubt, fitting all the audio in and not stuttering and being the the highest quality we could get wasn't easy, it was quite a problem even with the size of blu-ray.
At one point we seriously considered dual layer Blu-ray cos of disk space issues.
But personally I think the audio is really really good, but maybe i'm biased