"There is another way to do it. I don't remember the details but I think you use a combination of GraphEdit and Intervideo WinDVD (a version that decodes DTS)."

This is highly likely, since I used both to help me create a 5.1 soundtrack from the 2.0 PCM tracks. Finding the details, however, will be difficult. Doom9 would be your best bet, as that's where I found the conversion process I needed.

"Would there be any glaring audio problems if I mixed a source with 5.1 with a 2.0 source? (Assuming that I was watching it on 2.0 speakers anyway.)"

That depends on 1) how you downmix your 5.1, 2) what sounds you are trying to edit, and 3) if your final product is 2.0. MagnoliaFan has made some fantastic audio edits with dialogue - and it sounds flawless.

Can you give us some idea about what you are trying to do?