clenchdwarf said:

I wouldn't bother turning 2-channel Dolby Surround into 5.1 with either software or hardware; any surround sound system will have hardware decoding for DPL from 2-channel sources. Let the viewer decide whether to turn on surround decoding or watch it in stereo.

ALAC, FLAC, WavPack and The True Audio are some lossless formats that are legal in mkv. (No, I've never come across TTA either.) Of those, FLAC seems like it would be the best-supported.

As for converting AC3 to lossless, I can't see how that is any different from just playing the AC3 file in the first place. Personally, I was always disappointed in the audio from DVDs; it just didn't seem as "alive" as laserdisc PCM. No, I haven't blind tested this, but Widescreen Review's DVD/LD comparisons often said the LD sound was better.

Listen to this file i posted on this website clenchdwarf

http://www.packupload.com/P2RKGCM63AO

this is the AC3 Pro Logic of track of Titan A.E. converted to Flac.

converting it to FLAC removes Dialnorm & DRC & brings it back to its normal volume.

here is the ac3 2.0 Pro Logic track of the Star Wars Episode 1 The Phantom Menace converted to MP3

http://www.packupload.com/6BDLEMC79Q1

Compare the fidelity of these rips to Blu Ray & Laserdisc & I guarantee it will match it