Here's my setup. I have a Panasonic DMR-EA18K (recorder) connected via TOSLINK cables to a ONKYO TX-SR575 receiver. When I play a DVD with Dolby encoded audio, the receiver properly identifies the source as Dolby by lighting up the little red Dolby icon on it's display, BUT, the audio doesn't get processed as Dolby by the receiver. It seems to think it is PCM input from the Panny. Normally the receiver will, based on audio input, provide a list of processing options. In this case Dolby isn't one of them. As a result, I don't get the fullness of sound that I do on my Sony Blu-Ray player for example. The Sony BluRay is connected to the same Onkyo receiver and the Dolby sound will be processed correctly. By the way, I have tried various DVDs with Dolby sound the they all provide the same symptoms (no Dolby sound).
So, having said all this, I was wondering if anyone could help me understand the audio signal interraction between a Dolby source like my Panny DMR-EA18K and the Onkyo receiver so that I can figure out where that problem source might be.