Dolby Digital

How does Dolby Digital work?
I have a 5.1 Home Theatre system in my living room. I have my Dvd Player hooked up through coaxial audio and my digital cable through optical audio. When I am watching tv, and when set up for dolby digital, sound only comes out through the center speaker and subwoofer on most stations. The other speakers put out some fuzz noise with a little bit of garbled audio. When I change the settings to stereo, all speakers are used. Am I donig something wrong? I spent 30 bucks on those 2 wires and I expected better sound quality. I also hear a slight fuzz in the speakers too. Maybe everything is fine, but I expected more. p.s. my system has a few different dolby digital settings, but they all come out with the same result.
I am pretty sure I have Dolby Pro Logic 2, Dolby Digital, and DTS. I am new to this so sorry. I just got it yesterday it's an RCA RT2770, not the best brand, but it was affordable.
When you play DVDs, make sure in the DVD menu you pick either DTS or Dolby Digital.
On your DVD player, go to the audio settings and make sure you output "bitstream" (or something similar) and not PCM.
On your digital cable set-top box, go to settings and make sure you output DD and NOT PCM.
Finally, make sure your speakers are connected correctly.
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