So, I was showing a friend of mine my find (Sony DVP-S7000) and we where doing a side by side comparison of his player and mine. It outputs PCM just fine but when I set it to "AC-3 Digital" we get no output. We tried direct on the receiver (Onkyo TX-DS787) as well as regular input. We used Toslink and it did work for PCM as mentioned already.
From what I have read and understand there is no difference between AC-3 and Dolby Digital, Dolby just though that they needed to give it a better name. RF is another story entirely of course, and almost virtually exclusive to Laser Disc, so obviously not part of the issue. We ruled out the receiver as the problem, it works fine with the other DVD player.
So, there is something wrong with the player, or AC-3 is a different animal, or I am missing something (I have scanned through the settings to find the culprit for this error.)
(I have not tried connecting this DVD player via SPDIF to any other receiver, DAC, or processor.)
If there are any details you need to diagnose the problem just ask and I will provide the appropriate information sometime later.
Thanks in advance for any help.