Dolby digital for videos in itunes does not work on my new Sapphire 7770 video card.
If you are running the AMD driver, iTunes fails to recognize it (The Surround Audio track is greyed out). If you are running the Realtek driver then iTunes will recognize it but as soon as you select the Surround Audio track then iTunes locks up for about a minute before proceeding to continue to play the video with no sound.
As far as I can tell, iTunes digital output does not currently work with any Radeon HDMI audio device.
Apple provides a feedback form for iTunes here: http://www.apple.com/feedback/itunesapp.html
You might want to send them a note asking that they fix this (as I have done).