That is very interesting (although not to you I'm sure as you're probably pretty frustrated by now).
As far as I know, satellite is always all digital so the Dolby On setting *should* mean if the broadcast is any flavor of DD send it as is (same as 'bitstream' for a dvd player) and if Off send it as PCM which is still digital.
In that link to the Yamaha system that markw posted there is a tab that says 'downloads' but you need to register with Yamaha to dowload the manual. If you could get that manual, I'd like to see what it says about configuring the digital input. It shouldn't be this hard!