I have to admit, I don't know the speakers, but I do know audio CODECS and processing algorithms reasonably well.
From looking at the Edifier instructions, your decoding choices are: MUSIC/MOVIE/EMUL/ MATRIX/ VIRT/ GAME. If Edifier are using the descriptions in the same way as Dolby then here's what should be happening to the sound
- DPL II MUSIC takes stereo audio and makes it in to a surround (The manual doesn't make any mention of the Dimension, Centre Width or Panorama settings AFAICT) Personally I think it's debatable whether MUSIC mode helps the sound, but each to their own
- MOVIE - this will decode any embedded Dolby Surround signal contained in stereo audio to make a centre channel and rear surround channel(s). It also works with plain stereo signals but the effect isn't quite so good but still decent for watching TV
- EMUL (Emulation) - this is old skool Dolby ProLogic. It decodes Dolby Surround-encoded material but doesn't do anything to make plain stereo in to surround
- MATRIX - works on mono sources
- VIRT (Virtual) - not really sure why this one is included. It's used to try to recreate some surround effect from a 2ch speaker system. It is actually useful for headphones, but I can't see an application where the system has 5 satellites unless it's likely that only the front speakers will be set-up.
- GAME - changes the bass management and better suits game play
All the above work on stereo signals or stereo with the hidden Dolby Surround encoded centre/surround channels. What's missing is an all-channel-stereo mode. It's not one of the Dolby modes, so that's probably why, but it's still a useful way to play music as all the satellites work at the same sound level; it's stereo spread across all speakers.
DD/DTS are the true discrete 5.1 sound format. This would be Bitstream audio as you'd get from a DVD film playing from a DVD/BD player or Playstation console. Make sure your sound card is set to pass Bitstream audio, and that you're playing a source that has a DD or DTS soundtrack selected.
Optical can carry Bitstream for 5.1 audio or PCM stereo (44.1kHz in your case with the Edifiers).