I'm not sure what the story is with the OSD not appearing via s-video or the loss of audio. Can you get other video signals through the 970?
The SURR MODE portion of the Input Settings Menus is not ever a complete list - it is restricted to the modes available for the input in question at the time you are in the menu. So if you don't have a Dolby Digital signal coming in to that input, the SURR MODE list will not offer Dolby Digital as an option. Personally, I wouldn't worry about this, as you can use the Dolby, DTS, and Stereo buttons to select the modes you prefer while listening to the various possible modes and it will remember those preferences for each of the different cases (something that you're not going to be able to do from the menu anyway, as it only displays the setting for the format currently being processed).