Onkyo 606 audio settings help!

[Automission]

So, I'm trying to set up my Onkyo 606 to output the audio. Aside from confusion in hertz, I don't know how to do all the settings.
Like you can choose from pcm/analog and choose stereo, mono, pure audio, etc. Then there is Dolby Digital and you can pick a load from that. Yet despite what I pick, my sky box won't output in 5.1 dolby digital despite what settings I pick.

I'd assume it'd show on the Onkyo's screen if it was working or not. So do I need to use optical to get 5.1 out of a sky box? What settings do I need to pick to get it to work, to output 5.1 in a show that has 5.1, and stereo from stereo Tv shows?