Gotta give Toshiba some credit - they had the 2705 manual available online with minimal hunting. It's not always that easy. Page 38 covers what we are interested in. The options certainly are odd, but I think that's partly the result of the player not having an onboard DTS decoder (in 2001 that was still something that entry level players didn't have the processing power to handle). Basically, either "Stream/PCM" or "Dolby Digital/PCM" would work for your needs, although "Stream/PCM" is preferred.

It's been a few years since I used a Model 950, so I'm going on fuzzy memories (and the pain pill I took a couple hours ago likely isn't doing anything especially good to help sharpen those memories), but I would suggest two things. First, watch the 950's front panel when you start watching a DVD - when you transition from the menu to the movie itself. The 950 will show what the incoming signal format is briefly: DTS 3/2.1, DD 3/2.1, DD 2/0.0, etc. Make sure that you are getting DD 3/2.1 or DTS 3/2.1, as this indicates a 5.1 source. If you have DD 2/0.0 or PCM, then something is wrong upstream of the 950 and the 950 is simply doing its job.

If you have a "3/2.1" input, then we need to scroll through the surround modes until you see something like "Dolby D" or (if you have a 6.1 or 7.1 speaker setup) "DD CR-C". It appears that you have a 5.1 speaker setup. In that case, you should just see "Dolby D" when listening to a Dolby Digital 5.1 disc. If that's not what you are seeing, I'd suggest using the remote to try cycling through Dolby modes to get to just "Dolby D" to be sure there's no downmixing going on in the 950.