There are several surround processing modes -- the "surround" mode will apply Dolby Pro-Logic decoding to stereo analog inputs, which may or may not provide much surround activity. There's the "3 Stereo" mode that you've apparently already discovered, but not a "5 Stereo". There is "stereo" which is just exactly what it sounds like. There are also several DSP modes: Natural, Jazz, Hall, and Stadium. All four are available with any two-channel input (analog or digital), but not with multi-channel inputs such as Dolby Digital 5.1. You might try Natural -- as I recall, it was one of the better DSP modes.
The monitor output is for the 1050's video switching -- it outputs the video signal from the selected input, and should be connected to your TV's video input if you are using the video switching.
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