Wow!! Cool news, thanks for the update ddaryl.
Just fyi, there are several ways of encoding a DD 5.1 signal. There are many more ways of doing this on the fly in real time. There is "true" DD 5.1 which everyone is used to with DVDs that truly has a discrete signal coming from each channel, and then there is "faked" 5.1 which is done with the use of low cpu-intensive stereo pans in the front and rear.
Of course the latter doesn\'t sound as realistic (not as good channel discretion) but it\'s still a 5.1 signal which is no easy feat. So far, only the sound processing power of the Xbox seems really up to the task of spitting out a great sounding 5.1 track in real-time with its dual 24-bit 200Mhz DSPs.
It will be interesting to see which the PS2 will use.