Both DD (
Dolby Digital) and DTS (
Digital Theater Systems) are standards for encoding up to 5.1 audio streams.
Some media (like DVD's) have their audio pre-encoded into this format (it has already been converted and stored).
Others are encoded in other formats or not encoded at all.
As it stands now, your onboard audio codec is only capable of outputting Stereo LPCM (uncompressed) or bitstreaming (simply passing through) a DD or DTS stream.
The only way you will be able to output 5.1 surround regardless of the format is to obtain a sound card that is capable of DDL (Dolby Digital Live) or DTS Connect Encoding.
A sound card such as this will allow you to encode in real time up to 5.1 audio channels for output over a digital connection.
As to why your audio may not be playing back at all...
Make sure you have the S/PDIF Pass-through Device selected as the default audio device or make sure your player is set to use this for output.
Also, you may be able to pass through audio from your .mkv's, depending on how they are encoded.
If the audio stream is a DTS, DD or AC-3 (another name for DD), you will have no issues.
Otherwise, there will be no issues outputting stereo sound.