75-80% of a sound track is on the center channel. If that wasn't being sent to the L/R speakers in your config it would be quite noticeable.
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Since my wife is watching TV right now, I'll check the Pioneer DVD player later to see if there is a Stereo mode. Regarding the PCM, I believe that there won't be signal sent to the subwoofer via the optical audio. Whenever I watch or listen concert DVD in PCM mode, I don't hear much thumb thumb, and when I look in the back of the subwoofer, the red led light never turns green as it does not detect any subwoofer signal, unless the signal in PCM is really weak compared to the 5.1 format. Twirling my thumb... oh boy oh boy. heh heh heh. Crying in tears... but thank you any how.
I augment my center by using a completely different processor which produces DD 5.1 with NO center, NO rears and NO sub. This is not stereo! Dialog is present in left and right because you have defeated the center or instructed your processor that you have no center so that's the way sound is routed. The front panel display will read "digital THX" when DD 5.1 is present. It only reverts to "stereo" for PCM information.
Sorry, I didn't understand your original post until I read it again. I think you are correct that the pre/pro is recognizing the format that is output from the DVD player and breifly flashes that format on the display, then it goes into the mode that you have configured.
MY HT receiver does this too. Sometimes movie trailers or additional material on a DVD is encoded in DD 2.0 or some other format. I see my display change from DD 2.0 to DD 3/2/1, etc. as it goes from previews to the main feature. I think it is simply telling you what format is encoded on the disc at that time.
Your setup as you described it should be correct.