I recently moved and am having to rehookup all of my equipment. I have used it in the past, so I know that it works.
Anyway, my current setup is simple. I have a cable box with sound going into my receiver (2 channel audio) and also have the tuner working to puck up sattelite radio. Both of those work perfectly. The problem is with my DVD player. I have the optical cable running directly from the DVD player (fairly new progressive scan Panasonic) into my receiver (Sony STR-DE445). The receiver unfortunately is unable to detect anything coming from the DVD player and simply doesn't output any sound. I even tried using the 2 channel audio option with the DVD going into the receiver and it did not work.
So, for now, I'm forced to have the 2 channel sound go from the DVD player into the TV.
The receiver requires you to specify an optical setting -- it is unable to automatically detect it. There is a button on the front that need to be pressed to force it to see the otical connection.