Anonymous and JVC - thanks for the replies.
1. Yes, DVD is connected to receiver via optical digital cable.
2. Yes, double checked and assignment is correct.
3. Yes, and this setting is when I lose sound. If it is set on PCM, I get sound (stereo or pro logic), but of course it is not 5.1.
My only guess is that there is something wrong with the receiver (DD processor?????). I hate to give up on the receiver - due to a few moves, getting married, kids, etc., I have never gotten to use this receiver for what I intended. I also hate to junk it because I do use it's dual room, dual source capability. I cannnot afford a new receiver with that feature. Any guidance would be great, and again, thanks for replying!!