DVD player w/ 2ch 5ch conversion ability?

Your idea of a multichannel player that includes matrix logic circuitry to create the missing channels when playing 2-channel media is very interesting. I have not heard of such a device, but it wouldn't be too hard to Mod an existing unit to do this job.

Of course Multichannel players go the other way (mixdown of multichannel material to stereo) unless the disc producer has prohibited this by some kind of code in the disc.

I think you're not going to find a DVD player that has such features on board. Changing your receiver or processor will probably be necessary.

I'd try to find a used Denon AVD-2000.

I use one for DD decoding and D/A conversion for 2 channel music. I don't like DSP modes, but on this unit I do find myself using them ~20% of the time. It's a wonderful unit and available used for as little as $200 via ebay or audiogon. It also has the 5 channel stereo mode you mentioned and liked (by Denon).

Almost any receiver will have analog 5.1 inputs making this an easy insertion to your system. The unit is also faily small. Check audioreview.com for AVD-2000 reviews as well.

Good Luck,
Wade
wfd107@psu.edu if you have any specific questions