Best Setup for Philips DVP3962 + Yamaha YHT-440

So I've moved in with my girl and she's got nice electronics.

She's got a Yamaha YHT-440 Receiver/Speaker package and a Philips DVP3962 upconvert DVD player. I'm trying to figure this stuff out - my I used to just play DVDs on my puter with a 3.1 speaker - but now I'm trying to figure out how all this surround sound stuff/HDTV stuff works.

The Yamaha Receiver HTR-5640 is intimidating to me. As near as I can tell the best sound I'll be able to get out of this rig is to hook up the digital coaxial since that's the best audio out jack on the DVD player (although the htr has 6.1 inputs).

Question 1 > Can I get true surround on the dig coax? I got Raiders.Lost.Ark and that's got a THX optimizer on it that sends test signals to each speaker and it looks like if I set the htr to Dolby Digital that's the only way to get each speaker to match the TXH thingy. There's just a myriad of options/presets - anyone messed with this kind of receiver?

Question 2 > What do I have to have to get the DTS working? I have a ASUS M4A78-EM motherboard that has Realtek ALC887
8 Channels and HDMI out - would that be a better way to get best sound and pic? Has anyone done this, I've never played with multi channel stuff out of a mobo before.

Question 3 > The Philips has a USB input on the front - I got a movie encoded AC3-4 Channel - what does that mean?

Any help/advice appreciated.