Your results match what I would expect perfectly when using any stereo source (Dolby 2.0, PCM, or an analog stereo source like a VCR). You only have your center channel set to "small" so the only way to get anything from a stereo source to the sub is to use Stereo 5, which duplicates the (full range) signals from the mains to each speaker. Stereo and Dolby Digital both send information to the mains only - and the mains are set to large, so no data will go to the sub. Pro Logic, Pro Logic II, and DTS NEO:6 will generate signals for the center and surrounds, and those generated signals may not carry any of the sub-80Hz data from the mains.

Boblinds made some excellent suggestions in his post. His experience also matches mine closely. My floorstanding speakers (which are rated to ~30Hz) have worked best for me when paired with my LFM-1 by setting them to small and setting the crossover for them to 60Hz.