I've been lurking for quite awhile and still relatively new but I thought i'd try to answer your question. Others can correct me if i'm wrong.
The sony reader actually converts DOC format to RTF using MS Word. So from the two listed formats, the default would be RTF. If your PDF contains images or tables, I believe these will also be lost in the conversion.
I personally haven't tried the Sony DOC to RTF conversion as I don't have MS Word installed on my system (I use Open Office), so I can't comment on any result comparisons between Sony's auto conversion or other utilities. However, any RTF file I created with other software to retain image or table data within it is considered corrupted by the Sony software.
If your PDF file is just text data with some formatting, then the LIBPRS500 utility PDF2LRF works great. Scan/search the rest of the forum and stickies for other utilities and tricks.
Hope that helps!