Then it's working as intended. The only time I care about lossless audio is for archival.

Something else that might shock you is that it's only connected to a 1080P display. The horror!
It doesn't, as I said it's an old receiver. I even listed the model numbers for each component.

That's all nice and theoretical, but which games can't deliver their surround sound through SPDIF?

That question is easily answered: Not a single game can deliver surround through S/PDIF.

The only exception to that rule would be if a game did on the fly sound compression to one of the supported compressed surround formats like DTS. Such games are rumored to exist but they seem to be more rare than dragons, unicorns or similar mythical beasts since I have never seen one.

As far as I have seen all games output sound in uncompressed PCM. And because of that the only output stereo through S/PDIF.

Thanks for the info! I have 2.1 speakers, but I've always wondered how surround sound was implemented in PC Games.
My girlfriend plays on XBOX 360 and One. The consoles are connected via HDMI to the TV and the TV outputs via TOSLink to the Receiver (+5.1 speakers) and she gets great surround sound on all games. Strange that most PC games don't have that option...
I always found the surround effect from those xbox games a lot better and pronounced than from most DVD movies.

I've done a quick research on why I've always thought that PC Games deliver Surround through SPDIF:
I have a Soundblaster X-Fi that converts the uncompressed PCM to DD or DTS via DD Live! or DTS-Connect.

I removed the Soundblaster recently because my latest GPU blocks the only PCI port, but I plan on replacing it with a Soundblaster Z - for better quality audio (than onboard) and because I have a few games in my backlog that use EAX(5).

Does anyone here, and forgive me if it's been mentioned and I missed it, record ONTO a computer, specifically instrumentation? When I got my new amp a few years back it came with a CD Rom for setting up a recording program on the PC by installing the software and then hooking the amp up to the PC via USB, but it SOUNDED AWFUL.

I can't play for shit and am in no mood to spend a fortune, but it would be nice to be able to record riffs now and then and now sound like it's being played back under a stack of pillows. :P

That's because you can configure the XBox to output sound in DTS. I didn't know that to be honest. I just googled it and found the following quote:

"Similar to PS4, the Xbox One also outputs to both HDMI audio and Toslink SPDIF simultaneously - with stereo, 5.1 LPCM, 7.1 LPCM and DTS supported on the former and stereo LPCM and DTS selectable for the latter."

Even though that references the XB One it's probably the same with the 360. While the audio may suffer a bit because of the compression it is possible to get 5.1 that way. HDMI would still be preferable if the receiver is new enough to support it.

Later, I'm doing like 10 things right now. :P Thank you. :D

In an hour I'm going to a concert... so maybe tomorrow. ;-)

I don't know if you read my second post above. In short: Some sound cards can encode uncompressed PCM into DD. ;-)