You said that the Pro-Logic LED is on. How about making sure that is off before playing the DVD. The receiver may be outputting everything in Pro-Logic, even when it receiving a Dolby Digital signal. Try setting the Listening Mode to Stereo (when you first turn on the unit). That way, if/when the receiver detects an audio signal, it will automatically determine if it is DD5.1 or not. Sometimes, when the first part of a movie is playing (intros and stuff like that), the receiver will output the sound in Pro-Logic. Then when the actual movie starts, it will switch to Dolby Digital.
Also, maybe you can try hooking your audio (and video) cable(s) from the DVD to another input (VIDEO 2, for example) on the receiver. There is a note in the manual that says when connecting video components with digital audio outputs, that VIDEO 2 or VIDEO 3 should be used. Since you only have VIDEO 2 on the 405, your options are limited.
Hope this helps.