Can you borrow an HDMI 1.3c or preferably an HDMI 1.4 cable (they are backward compatible) from neighbour or get one from a shop to test?
The 1.3b might not be allowing enough bandwidth to allow Graphics plus 5/7.1 sound (thus it only works on two channels!)
Ditch the optical cable; they're not capable of handling lossless audio, only 2.0 pcm streams. Only use high speed hdmi cables. When ordering cables, somewhere in the documentation it will say they're ready for DTS-HD MA and TrueHD. First gen hdmi's aren't sufficient.
HOW TO GET: Uncompressed PCM, Dolby TrueHD & Dts-HD MASTER Audio - Blu-ray Forum
Likewise, until you set up bitstreaming, you'll only get stereo from the machine to the receiver. The receiver, can use various surround decoders to output 5.1, but you know what they say: gigo.
Ideally, you want the machine to pass the audio straight through to the receiver as it's going to do a way better job of processing. It takes about 10 minutes to set up.
Guide: Setting Up Bitstreaming With Your Windows 7 HTPC – PART I
I have exactly the same issue, my laptop runs authentic Wind 7 64 bit and graphics card is ATI Radeon. The Sound configuration just shows only Stereo option. Will changing the HDMI cable impact the options? I dont think so.
Also I cant get to install some Realtek Media Center people are posting about. Any other hack to make it work? Damn! what a waste of Vaio
Quote