Dolby DIgital 5.1 doesn't work with DVD', only DTS works.

There will be no sound unless a Dolby Pro Logic or similar audio signal is in use. CD/DVD, broadcast etc.

you can't. that subwoofer can only be paired to the soundbar.

1) Switch Player off then On (this is to clean-boot firmware).
2) Wait until main menu appears
3) Open Disc Tray and Close Disc Tray (May not be necessary)
4) As soon as "No Disc" is displayed quickly press REPEAT on
remote quickly use the following code for your current
region:
Region 1: Press - 2,9,3,3,4
Region 2: Press - 5,7,5,3,8
Region 3: Press - 5,6,7,3,2
Region 4: Press - 7,6,8,8,4
Region 5: Press - 5,3,8,1,4
Region 6: Press - 2,4,4,6,2
5) Your current Region will appear in the top-right corner
6) Quickly Press "9" before it disappears (It should replace
the code with a "9" in the cThere isn`t currently a region hack for Blue-Ray Disksorner)
7) Switch Player Off and then On again.

Note that REPEAT is part of the code so one smooth press of
6 keys is required.

I believe he avr-5 has 6 channel inputs, what you will need is a dolby digital 5.1 and DTS outboard surround sound processor, say an item as the Technics SH-AC500 decoder, a Harman Kardon Signature 2.1 DTS version outboard processor/preamp, and many others on the market by different manufactors, Run the discrete audio outputs from the Processor into the AVR 5`s 6 channel inputs, select 6 channel input or DVD inputs on the receivers selector and your good to go. Be sure you are playing Dolby Digital 5.1 or DTS encoded material.

DTS-HDMA and Dolby TrueHD cannot be passed to your receiver via bitstream on the PS3. DTS-HDMA cannot be decoded either so you're out of luck there.
Dolby TrueHD can be decoded internally on the PS3 assuming your firmware is up to date. Set the Blu-ray HDMI output to PCM and you can then pass it to your receiver.
If this doesnt work, do a system update on your PS3.

If you put DVD with Dolby Digital soundtruck it will show on your TX-SR304 Dolby Digital mode, and if you have DVD with DTS mode it will show DTS

You have to raplace IR sensor PIC-26043TE2 or similar and should help.

If you get sound on direct mode say from dvd but no sound when you go to dolby make sure you have the right input selected by pressing the digitat input button on the front of the amp,ie if dvd optical out is pluged into amp optical input 1 select this on amp then set audio to prologic2.DVDs through this input will decode to dolby digital/dts.
hope this helps.
CABLE GUY.

have you turned it on from the dvd menu the easist way to tell if you have is there will be little speakers that light up on your amps screen (more than two) when the movie is playing (not The menu) Not all movies are encoded in DTS hopefully this helps