Atmos Surround Sound Issues

No, the Xbox One S does not simulate ATMOS from a 5.1 source.

However, since the Xbox One can run multiple sound applications at any given time (for example you run an Atmos enabled game, while having a music app running in the background), the console will ALWAYS output an ATMOS signal to your receiver, since the
game sound is in spatial surround.

Into that ATMOS spatial surround sound track, the stereo music track will be mixed in. But since the music track does not have surround or height information in it's stereo signal, you won't get the music in ATMOS spatial surround, even if your receiver
shows ATMOS coming in.

If you watch a 5.1 video in VUDU, the Xbox will distribute the 5.1 sound information to the front, center, back surround and subwoofer channels for the ATMOS signal, and your ceiling speakers for example won't get sound.

So even if your receiver shows ATMOS, and you have twenty speakers mounted in your home cinema, only the standard 5.1 speakers will produce sound, if you watch a 5.1 sound source.

I like the Turtle Beach Stealth 700. It uses Windows Sonic for surround sound, and is Dolby Atmos compatible.

The Stealth 800X is 7.1 surround, and can be found on sale for around $180

Most of the rest of the Xbox Surround Sound Headsets run above the $200 mark.

Maybe this can help https://www.howtogeek.com/309853/how-to-use-dolby-atmos-surround-sound-on-windows-10/

I also re-installed the dolby acces app. Demo content in the app itself plays sound from my height speakers and the rest of my speakers. I only get this problem when playing games, where only the height speakers are not playing any sound at all.

It seems that the console and your audio system is properly configured for Dolby Atmos, since the Atmos Demo works.

Also try to download the free "Insects" demo from Microsoft, which allows you to switch between Dolby Atmos and "regular" surround sound.

Check if Atmos works in that demo, as the Atmos Demos in the app are usually videos with a fixed, pre-rendered audio track.

Also, which games are you trying exactly? Do the games really support Dolby Atmos themselves? Because the Xbox One S will not "upscale" regular surround sound from non-Atmos games to have height information.

I'm curious about this issue, too, because when I first downloaded the Dolby app, if you remember, there was an issue with bizarre static when choosing ATMOS as the output (at least, it was doing that for headphones.) At that time, in the setup, there was
a checkbox in the Xbox Settings app which said something to the effect of "enable virtual surround in apps." After this static issue was fixed, I noticed that the checkbox for surround in apps was no longer available. I wonder if this was disabled because
it was somehow contributing to the static, and also, if that means it simply isn't outputting surround sound when using an app vs. a game....

That's a different issue as it only refers to Headphones. Atmos Bitstream is only for AVRs. The Virtual Surround checkbox was removed because virtual surround is now always on.