I’m not aware of any TVs that do downscaling, in most cases, they pass along the request for a particular format when the receiving device is connected via HDMI-ARC to the source, which has the responsibility of sending the correct information. Most, if not all, TVs merely pass through what they are handed by the source, the audio settings usually define what internal sources, such as antenna/tuner, and some smart apps generate. There’s an odd exception with stereo, where the TV can extract a stereo signal from most codecs, so that it can play it on their own speakers, but that doesn’t extend to changing, for instance, DTS to Dolby Digital.
In general. 
I would be fascinated to be corrected in the case of your TV.
However, optical is a one way transmission. Your TV has absolutely no knowledge even if there is a device on the other end, much less what it is and what it requires. This puts the onus of defining what codec is being sent to the TV on the audio settings for the source device. I would be looking at those sources, and be certain that they are locked down to sending Dolby Digital.
To my knowledge, there has been no change to the firmware regarding 5.1.
The source device at present is mainly the TV and apps on the TV. TV is set to optical output. However, as I said, where 5.1 once worked is now not the case. I am going to try an ARC to DD converter to test whether it is an issue on the DD front.
This is odd. I changed the output of the TV from Optical to HDMI ARC, just whilst testing. Digital sound out is auto. Dolby Digital 5.1 suddenly works from all sources including the Firestick.
This is strange as I have an old Playstation plugged into HDMI 2 and is is powered off. The only route to the Playbar is via the Optical cable.
Could this be a bug in the LG TV software?
It’s certainly possible. Might be worth contacting LG about your findings, and see if they are planning a firmware update to fix the issue.
And I agree...that is odd. When you changed to HDMI-ARC, did the optical remain active?
I’d also try unplugging the PlayStation 2, in case there’s some sort of HDMI-CEC connection being made even while powered down ( via resistance checking?). At least a test seems worthwhile.
Nice of LG to use the public as their QA department ;)
Yes, it did remain active. I think it is to do with the LG sync, which is an option under the Optical settings. I have now disabled that and the Optical is now pushing DD 5.1 to the Soundbar, which is good. The TV now seems to be passing through 5.1 from other devices such as a Firestick, e.g. Plex, Netflix, Prime etc.
