Darn it!
I can't consistently replicate it. But just now I was watching a standard-def movie channel and processing PL II Movie. I flipped to a high-def channel and the LFE indicator illuminated. I hit Dolby Modes to check what the surround setting was on and it was PL II Movie. I then hit Dolby Modes once again and it properly switched to "Dolby Digital". I don't understand why it didn't originally default to Dolby Digital.
If I flipped back to the original standard-def channel and then back again to the high-def channel, everything defaulted properly. Shoot.
I'll keep trying

Do you have surround back speakers enabled? Also, did it only say Pro Logic II Movie or did it say Dolby Digital+Pro Logic II Movie?

I have a 5.1 setup and never disable my surrounds. Whenever this occurs, it always says "Pro Logic II Movie" only.

When you changed it to "Dolby Digital" did it still show all five speakers and the LFE as being active? (That would confirm that it was a Dolby 5.1 source, in which case there may be a bug with the way the 990 is reporting the current processing mode...) Ooh! Are you running the latest firmware? If you are still running the firmware that you had back in the spring (3.07) rather than the newer firmware (3.11), pressing the surround mode button once actually changes the processing mode...

I have the newer firmware where if you hit Dolby Modes or Stereo Modes it displays the current setting and if you hit it again, it then starts cycling. I loved this in the new firmware.
I do remember that it for sure showed the LFE as being active when it changed to Dolby Digital. I didn't pay much attention to the other channels on the display.
Here is something I just now noticed. There is some defaulting-action that goes on and I wonder if it has something to do with my situation. I'm watching PBS right now and it seems to be a non-dolby digital broadcast (i.e. - I get Pro Logic II). If I switch it to "Dolby Digital + Dolby Digital vs 5-SP wide" just for the heck of it and then flip from PBS to another channel that is in dolby digital the processing is properly set to "Dolby Digital". Then if I immediately flip back to PBS the processing is Pro Logic II Movie. I think I read something about this in the manual on page 25. It lost my previous setting.
I guess I see the note in the manual and it sort of makes sense. But to me that dosn't mean things in dolby digital shouldn't default to "Dolby Digital". So that's what still baffles me.
I'll let ya know if I notice any more patterns

Darn! It for sure even happens with DVDs. I thought before it was doing it with DVDs too but couldn't remember for sure. Yep, had the 990 on watching TV, I put a DVD in, the previews started up, eventually I got tired of the previews and hit menu and chose “Play Movie”. The movie started and sure enough it was in “Pro Logic II Movie”. I hit Dolby Modes once and it flipped to Dolby Digital. And from that point on it is stuck/forced to remain on Dolby Digital (even if I hit Dolby Modes again). Dolby Digital is correct, but why was it ever on Pro Logic II Movie.

I tried to replicate it by powering down everything, starting out watching TV and then going through all the steps. Now it always goes right to Dolby Digital.

So frustrating that a pattern can’t be found. I highly recommend everyone to check the processing mode when you think it should be on Dolby Digital (it might not be).

So now I can confirm it is doing it on both my DVD player and my digital set top box. Just can’t replicate it consistently. And this is not a defaulting situation like the manual states occurs for Dolby Digital 2.0 or PCM sources. DVD, LFE indicator is illuminated, etc.

Annoying.

Another example, I'm watching the Zippo 200 nascar race right now. I just turned it on and the 990 went to Pro Logic II Movie. LFE indicator is lit and the dobly digital indicator is lit. If I hit Dolby Modes it goes to "Dolby Digital". If I change channels and come back it still goes to Dolby Digital (as it should). If I turn off the 990 and back on, it goes to Dolby Digital (as it should).
I have no clue why it was on Pro Logic II Movie before. I can't even get it to that now (not that I want to).
Think I should send the 990 into Outlaw? Sure is a pain, I'd hate too. This would be the 2nd time.

This is curious... If the "Dolby Digital" and "LFE" indicators are both on, then the 990 would appear to be properly recognizing and decoding the Dolby Digital bitstream, which makes me wonder if the displayed "Pro Logic II" is perhaps a bug in the way the active mode is reported (in other words, not a bug in the processing mode actually being employed). After all, the simple fact that you have audio at all suggests that it is properly applying Dolby Digital decoding, and the status of the front panel indicators seems to support that reasoning.

I don't think this is a case where returning your 990 to Outlaw is going to do you any good, unless the mode problem is accompanied by an actual loss of audio output somehow (which it appears is not the case). It may be that you've found an intermittent display bug?

Yeah, I see what you're saying there. But, I can say, that when I flip it from Pro Logic II Movie to Dolby Digital, there is a significant change in sound. So, sound processing is changing. I don't think it is just a display issue.

I've noticed before when watching stuff in Pro Logic II Movie that the center channel sounds different (even maybe louder) than items in Dolby Digital and that for example is what I notice when I change this to Dolby Digital (front soundstage is smoother across the board and center is less pronounced).

Yeah, I've never experienced audio dropout, so that is good. But I'm thinking it is more of a bug with the 990 not auto-switching to the proper processing mode. It almost seems like it can see the Dolby Digital signal coming in, but doesn't switch to Dolby Digital.

Too bad I didn't have another 990 I could plug in and use for a week or something and see if it does it also.

Well, I very well might have stumbled upon something. Possibly a bug/issue (whatever you want to call it) in the 990.
I thought for the heck of it I would unplug the left/right analog connection from my digital set top box to my 990, leaving only the coax cable hooked up. Well, it has been 2 days so far, and not once has it errantly defaulted to Pro Logic II Movie. Every single Dolby Digital broadcast has correctly set the 990 to Dolby Digital. I'm gonna give it a week before I completely make up my mind that I found the issue.
Unfortunately this sucks (if this is in fact the issue), because my zone two setup can't receive audio unless the analog connections are connected. If this proves to be the issue, it almost seems like the 990 isn't properly automatically making use of the supplied digital signal.