There is another place in the menu where you need to enable audio settings in order to get Atmos at all on the PS5. While it says the PS5 officially does not support it, there is a config that allows it to work, it was just very hidden. It does not actually give Atmos support, it just permits it to work. One place is you need to enable 7.1 in Audio settings, then there is another setting for BD.
Tweaks and tips for making the most of Sony's next-gen console
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It is that Audio Format Priority, if you set it to Dolby, Atmos works. The settings have actually changed since that article, since 7.1 config was not present back then, but the Audio Priority setting is still there