Home Theatre Won't Covert to Surround Sound

[bugmenot]

My standalone DVD player is not compatible with MP2 so I used AC3 when authoring a DVD. The source AVI is 2 channel.
When I play the DVD, the DVD player and receiver indicate that it is 'Dolby' and only 2 channel.
Attempts to have the receiver convert these 2 channels to surround sound using the remote have no effect.

If I author the same AVI as MP2 and play it back on a MP2 compatible home theatre, sound plays back through all 5.1 speakers.

All assistance is appreciated.

[MOVIEGEEK]

You have three choices:
1.Use a program such as Vegas Video 5+DVD to make 5.1ch AC3.
2.Use analog composite cables to connect from DVD player to HT receiver.
3.Buy a new DVD player that supports MP2.

[bugmenot]

You have three choices:
1.Use a program such as Vegas Video 5+DVD to make 5.1ch AC3.
2.Use analog composite cables to connect from DVD player to HT receiver.
3.Buy a new DVD player that supports MP2.

I am confused.
Haven't I done your first suggestion in my first sentence?