Hate to tell you guys this, but it works perfectly fine on my set up. The 360 and PS3 are plugged into the TV via HDMI, set each respective system to 5.1 in their settings, and audio out via optical on the TV to the amp. The receiver indicates that it's getting a Dolby Digital signal and splits the sound through the channels properly. This works on games, Blu-ray, etc.
AND, for sources with stereo sound it specifically indicates that it is not getting a Dolby Digital signal at which point you can change the sound settings to 2 speaker, 4 speaker, or simulated (fake) surround. When it's getting a Dolby Digital signal (which it does) then it doesn't allow you to change the channel setup so it's pretty obvious when I'm getting Dolby Digital.
I'm no audio expert, but I can tell the difference between what lights on the receiver are indicating what, and I can tell the difference between simulated surround and proper 5 channel surround.
But say I'm wrong, what's the deal then? Why is my receiver telling me it's decoding a Dolby Digital signal? Why am I getting proper 5 channel surround? Why does my receiver automatically and properly switch to stereo sound for sources that aren't Dolby Digital (like the Wii)?