PCM vs. DD 5.1 Question

[JayAuritt]

I have a PS3 connected to a Yamaha RXV-1300 receiver via optical cable (HDMI directly to TV for video) for audio. When I play a movie with uncompressed PCM audio, my receiver indicates (via the lit-up diagram on the unit) that 2 channels are being utilized. When I play the same movie using the DD 5.1 audio, the receiver indicates 5.1 channels being utilized. Now, I've been told that this is normal, and that the receiver somehow takes the 2 PCM channels and converts it to 5.1 (or something like that). This may be true, but the audio does NOT fill the room when playing the PCM track as it does with the DD 5.1 track, which sounds, to me, much better and fuller. So, either I need my hearing checked or something else is out of whack. Anyone have any thoughts on this?