Norma s., I went through the same "learning curve" while setting up my neighbor's HDMI-equipped DVD player. His Yamaha receiver won't handle the audio signal from HDMI so we connected an optical digital cable instead for sound.
At first his receiver kept locking on to "PCM" two-channel mode even on 5.1 movies. After some head-scratching I finally figured it out. What I found was that in order to get multichannel sound from the new player via the optical output you have to go into the player's setup menu and turn the HDMI audio to "off". Yours, like his, is probably set to "on" as the factory default.
After you turn the HDMI audio off, this should bring up a menu for the optical digital output which you can set to output "all formats" (meaning Dolby Digital/DTS surround).
This won't be the newer True-HD or DTS-Master Audio but at least you will have surround sound. You would need a player with internal decoding and 5.1 or 7.1 analog outs to get the newest formats into your B&K receiver.
Good luck!
-jz