Toslink is limited in bandwidth. I believe your receiver can take some information from the 5.1 and process it for the extra two channels. I don't believe you can pass high definition signals in 7.1.
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toslink shares the same specification as digital coax: S/PDIF. It can transfer anything that the S/DPIG specification can do. I believe this is limited at 24/96 for 2-channel PCM. It can do the maximum bandwidth of old school Dolby Digital and DTS. The Dolby Digital Plus format may have problems. Obviously, it will not carry hi-res bluray audio formats Dolby TrueHD and DTS-MA HD.