Thinking about this a bit more I think what is happening is the audio renderer in PD10 must be somehow incompatible with the sound card. To check this I downloaded Zoom Player which gives me several audio renderer's to pick from. I did this and the audio works perfectly when using AC3. When playing a DVD this is the graph information:
Enhanced Video Renderer (EVR)
Analog out 01-08 (AudioFire 12)
AC3 Filter
FFDShow Video Decoder
DVD Navigator
When I configured Zoom Player and selected the Audio Renderer (AF12) this was the list presented:
Analog out 01-08 (AudioFire 12)
CyberLink Audio Renderer (PDVD10)
Analog out 09-12 (AudioFire 12)
Default DirectSound Device
Default WaveOut Device
DirectSound Analog out 01-08 (AudioFire 12)
DirectSound Analog out 09-12 (AudioFire 12)
I selected "Analog out 01-08 (AudioFire 12)". When the DVD is playing and I look at the AC3Filter in real time I can see the 5.1 signal coming into it from DVD Navigator. So DVD Navigator is reading from the DVD, splitting the streams and sending them to FFDShow for video and AC3 for audio. AC3 in turn sends the analog output to the AF12 driver.
I would use ZoomPlayer except it cannot play Blu Ray movies and PD10 does a really great job with Blu Ray movies. So I am now wondering, is it possible to manually configure the audio renderer on PD10 or to replace it with AC3?
One nice thing with ZP is gives you a lot of detailed information. Since we now know that it works perfectly I can record all kinds of technical information from it that might help to see why PD10 incorrectly interprets the sound card as a single output channel. I think the reason is when it talks to the sound card driver it is seeing "0" channels, hence it defaults to 1 channel.
Hope this helps to solve this mystery,
Craig