Two Channel Dolby Digital ?

My Panasonic DVD recorder records the audio information in 2-channel Dolby Digital but I have the option of outputting the 2-channel signal as either a 2-channel Dolby Digital signal or a PCM signal. What is this player doing, or any other DVD player for that matter, when it outputs a 2-channel Dolby Digital signal as a PCM signal? The PCM signal seems to sound better than the 2-channel Dolby Digital signal as I beleive it should. Is the player using some sort of digital algorithm to replace what was lost in the analog to Dolby Digital compression encoding process?
Sounds like your player is down converting the signal to 48.--that you can record; 24/96 2channel DD, you should NOT be able to record.