We have a 7.1 setup but always play in 5.1
Now why would you be doing that? Now that I am over the quoted statement...
Nope, your Onkyo is not manfunctioning, in fact, the opposite.
From
this website, Up BD audio options are
English: DTS-HD Master Audio 5.1 ES Matrix
French: Dolby Digital 5.1 EX
Spanish: Dolby Digital 5.1 EX
English: DTS-HD 2.0... (more)
English: DTS-HD Master Audio 5.1 ES Matrix
French: Dolby Digital 5.1 EX
Spanish: Dolby Digital 5.1 EX
English: DTS-HD 2.0
English: DVS 2.0
What "matrixed" means is that, if you had a 6.1 setup, for this movie, when listening to the DTS HD MA encoded track, the back center channel (the 6th speaker) is not a unique track. Instead, the 6 the track is a mix from the left and right surrounds.
If you have a 5.1 AVR, it will be decoded as 5.1 but if you have a 6.1 AVR, it will be decoded as 6.1. If you have a 7.1 receiver, both the rear surround speakers will get the same track.