It's interesting that the peak indicator doesn't light when using source direct. When using analog connections, regardless of source direct or some other mode, it is the cd player that does the digital to analog conversion (cds are digital - pcm), so I would expect the output analog voltage to be the same in either case. It may be that with non-source direct, we have cd player doing the d-a and then receiver doing a-d, applying processing, like bass management, and then d-a - if that's the case then you are back to the case I described above.
I said it was 'unlikely' the output voltage is the culprit, but it looks like it is in your case. 2.2 volts is slightly higher than the standard 2v, like your dvd player. Not much you can do about it unless the output voltage of the cd player can be dialed down.