Greetings,
The Dolby Digital bitstream contains, in addition to the digitally encoded sound, metadata "about" the sound. This information includes the number of channels of audio that are encoded. The DD processor in the Outlaw receiver use this information to determine how to decode the channels.
The metadata information can also include a flag to indicate that a 2.0 DD signal (aka stereo) is actually a Dolby Surround matrix encoding that needs further (Dolby Pro Logic) decoding. Some receivers assume that a 2.0 encoded signal has a surround matrix and others respect the metadata flag (assuming it is present). I don't know exactly how the Outlaw receiver handles this but the manifestation when you have a 2.0 DD signal that is being matrix decoded is that the Outlaw receiver lights up the Dolby Digital display as well as the Dolby Pro Logic display. It also indicates that 5 speakers are active. If the DVD is DD 5.1 encoded, the display will look the same minus the Dolby Pro Logic indicator. In addition, the little arrows indicate what the digital coax (in your case) datastream is.
Many older Dolby surround recordings have little or no surround components when decoded with a Dolby Pro Logic receiver.
-andy