Actually, both of you were right. The DVD player was set to PCM and the DTS and DD output was off. I set them to bitstream and it works fine now.
Also, the RCA plug (coaxial output) which is soldered to the PCB on the player looked all cracked. So, I resoldered it. It works better now.
Thanks so much guys for your inputs. I really could not sleep properly last night thinking how much I might have to spend for repairing the receiver. Anyway, I plan to change the DVD player too. I might buy a Sony or Philips since I am on a budget at the moment.
Cheers,
Vivek