It does output LPCM 7.1 if the audio track is DTS-HD MA. Just not Dolby Digital or Dolby TrueHD.
Looks like you get screwed by Sony twice: one for a player that can't fully decode Dolby tracks, one for an AVR that can't decode any modern HD audios (who buys that kind of AVR these days?).
You should return the player and buy a player from other brands or if you want to stay with Sony brand, buy older models (2012 or older).