SETUP New DVD Input > not 5.1 signal

Are you playing a DVD movie disc with the multichannel soundtrack selected? Some discs have 2channel audio selected as the default. There should be a button on the remote which steps through the disc's available audio tracks and an on-screen display showing which has just been selecte.

Otherwise, it looks like a setting problem in the recoder/player.

Exactly what model of LG recorder/player do you have?
(So someone could check the manual or their own player to see if you've overlooked something.)

You might try unplugging the HDMI cable from the TV to see if that makes any difference. Sometimes HDMI handshake issues can cause strange things to happen.

Wasn't one of the optical inputs on back of receiver labeled "DVD"? Or at least, a digital coax input? Every A/V receiver I've seen had one or the other factory assigned to DVD. If none of the digital inputs were factory assigned to "DVD", you could have assigned the optical input #3 to DVD. Then all you'd have to do is push the DVD button, to watch a DVD. You also need to let the DVD player know you're using optical for audio, instead of HDMI (if there's a setting for that). The HDMI will be for video only. I still can't understand why in the world you assigned the DVR button, to something different, and what is labeled CD on rear panel?

The Audio Select button should be on "Auto", and the DVD player should be set to output the audio as "Bitstream". There's a "Speakers" button on front of receiver that's labeled "A/B/OFF". Make sure it's set to "A".

If all else fails, I recommend resetting the receiver to factory settings, like it was when you took it out of the box the first time. It will tell you how, in the owner's manual. Then, if one of the digital inputs is labeled "DVD", use that input. If it's a coax input (color coded orange or black) that's labeled for DVD, and your dvd player only has an optical output, then assign an optical output to "DVD". Don't go assigning different things to buttons on the remote. Then set receiver to "Auto", and dvd player to output "Bitstream", and you should be good to go, with dvd player. Since your receiver has HDMI inputs (one labeled DVD?), I'd run an HDMI cable from dvd to receiver, and then an HDMI from receiver to tv. You can buy cheap HDMI cables from Monoprice.com.

When going straight to tv for video, from dvd player, you need to make sure the tv's input is set to the input you used, when you want to watch a dvd. If you run HDMI to receiver, then one from receiver to tv, it will make things a lot easier. Then, to watch a dvd, you'll just push the DVD button on the Yamaha's remote.

HDMI/HDCP handshaking issues are not logical when there are implementation bugs in the equipment (TV, player, and/or receiver). They all affect one another: HDMI/HDCP is a bi-directional protocol. You need to try different (non-HDMI) cabling configurations if you want to try to track down or bypass the problem.

For testing, unplug all of the HDMI cables. Connect only using the yellow/red/white cabling to see if that works. Then connect using component/digital audio.
Then connect all hdmi to the receiver and only one hdmi from it to the TV. (use the digital audio back from the TV to the receiver to hear it.) Report the results of each.

Although there can be slight differences between RCA and optical digital audio connections, they can't be heard by most people.

Some additional comments, although they don't help resolve the issue:

I just took a quick look at the LG manual. Unfortunately, it seems to show that the digital audio output menu affects both the HDMI and S/PDIF outputs simultaneously and equally. (Many systems have a separate selection menu for each, although selections for one can limit what's available for the other.)

As best I can tell, "bitstream" is the only reasonable choice. You'll also have to avoid playing DTS audio tracks unless you connect the HDMI cable to the receiver. This is because DTS audio tracks can't be decoded by the LG and I don't believe any TVs have a DTS decoder.

No such thing as "signal loss" when using HDMI cables.  HDMI is a digital protocol, with robust error checking.  Monster and companies like it hate to hear this, but there's no such thing as gradual picture/sound degradation (or improvement) due to the "quality" of your HDMI cables.  Any "signal loss" will result in (at the very least) a very sparkly image that can be instantly recognized as faulty.  It's also almost impossible to occur in normal (under 30ft) HDMI runs, no matter how many connections you have.  So if you have the ability to use HDMI switching and audio on your receiver, use it.

Wayne,

Elsewhere I've read that LG receivers are, shall we say, quirky. You might want to consider trading it in for a receiver made by one of the more established audio/video companies (In alphabetical order, Denon, Marantz, Onkyo, Pioneer, Sherwood and Yamaha are the ones that come immediately to mind. I prefer Marantz, but each brand has its own proponents.)

Component video is not always as good as HDMI. You might not be able to tell the difference between 1080i and 1080p, though. The best component signals are usually only 1080i. In principle, 1080p could be sent over component but that's very rare. Broadcast HD is 720p or 1080i. HDMI v1.1 and v1.2 support 720p and 1080i with the lossy audio formats, but  HDMI v1.3 doubles that bandwidth to support 1080p and the lossless audio formats. V1.4 will double it again to support 3D at 1080p, ethernet and "backchannel" audio from the TV to the receiver. (For details see the wikipedia article at http://en.wikipedia.org/wiki/HDMI#Version_1.0_to_1.2 )

HDMI audio and video data currently is sent in only one direction: player to AVR to TV. It does not flow "backward" from TV to AVR. That's just the way it is.

Only the high-end of TVs from one particular manufacturer (I think it's Pioneer, but it might be Sony) forwards multichannel audio from other devices over its digital audio connection. All other TV models from all other manufacturers downmix incoming multichannel audio and forward only stereo audio. Multichannel audio is available only from their internal tuners. Presumably that'll be fixed when HDMI v1.4's backchannel is available, but you'll have to buy a new TV and a new AVR to be able use it.

You're right that ProLogic is a "fake" surround sound, although it can sound quite good. It tries to derive four separate audio channels from a two-channel stereo input: front left, center, front right and surround. (The same audio is sent to both surround speakers.) For discrete 5.1 or 7.1 audio, with separate surround channels plus a Low Frequency Effects channel,  you need either digital audio connections, HDMI connections or a separate analog connection for each of the 6 or 8 audio channels.

oops. I forgot to include Sony in my list of companies. Sorry.

Wayne,

At this point I think you need to investigate getting the HDMI firmware updated on all of your devices: player, receiver and TV. It's a complex protocol and the manufacturers are still having problems with interoperability.

Sorry, for some reason I was thinking you have an LG receiver. Your original post mentions you have a Yamaha, which I'd forgotten.

HDMI from player to AVR to TV should work. That way everything stays in the digital domain and should result in the best audio and video. Why it isn't working for you I don't know. All the other connections I've suggested have been just to see if you can get anything usable out of the player -- which it seems you can, so at least you can watch discs that way.

I'm sorry, but I don't think I can help much more. Perhaps people who have the same equipment that you have could provide more detailed suggestions.  One problem is that the population on this forum is relatively small, so I suspect that it's unlikely that anyone will have exactly the same combination of equipment that you have. One of the more populous forums might, though.(AVScience comes to mind)

You have my sympathy.

To my knowledge, firmware updates aren't possible for TVs and Receivers (it's possible that some very high-end receivers are updateable, but I'm almost certain the list would be very small).

The way firmware updates are handled varies from company to company and from product to product. Some use flash drives, some use a network connection, some have to be shipped to a repair center and some can't be updated. It's very annoying. (I prefer flash drives, myself -- you have to download to a computer first, but at least you don't risk turning the equipment into a brick if the network connection glitches.)

I'm getting email notices. Maybe they're being caught by your anti-spam filter.

Jason,

Denon receivers which support network functions (network radio, netflix, etc) automatically check for updates. Some of those receivers get updated almost monthly, to their owners' dismay.  Marantz requires their receivers to be sent to a repair center for firmware updates, even the ones which support USB devices.