Surround Sound not completely working

An optical cable simply can't pass 5.1/7.1 uncompressed, only HDMI or multichannel analog can (the latter of which the Xbox doesn't have). As such your headset (presumably optical) does NOT and cannot support 5.1/7.1 uncompressed. Instead it supports 5.1
Dolby Digital (DD=compressed), and virtually creates 7.1 from the 5.1 through processing (optical can't pass 7.1 DD+ either, only 5.1). Currently, the Xbox One cannot output Dolby Digital 5.1 over optical, which is why you do not get surround sound in your
headset. It is also not surprising that your TV is not handling 5.1/7.1 uncompressed properly, as that is something you really need an audio receiver to handle. What is probably happening is your TV is downmixing the uncompressed 5.1/7.1 to some sort of stereo
(2.1?), resulting is loss of some audio channels. The rest you hear as"virtual surround sound" created by your LG system.

The solution for you is to get a proper audio/video receiver (recommend Onkyo or Denon) that has HDMI inputs, can handle uncompressed 5.1/7.1, etc.; OR wait until the One can output DD 5.1 over optical, When the latter happens, keep in mind that most TVs
will NOT pass DD 5.1 out over optical. Perhaps yours does (some Vizio models do). If yours doesn't, you will never get true DD 5.1 (just because you hear sound from all speakers doesn't mean you are getting true DD 5.1) from your current setup and would need
to run the optical out directly to your LG system, instead of through the TV. Hope that helps.

How can it not be a support issue? The Beta Surround Sound is flawed and the Optical Surround Sound is missing Dolby completely. Who would fix it.

Are they surround sound? My DX12s are simulated surround sound and it works really well.

Ok, I found something. If I select "Stereo Uncompressed" in sound setting in Xb1, my AVR gives me the "Dolby PLII Movie" and "DTS Neo:6 Cimena" output options. Selecting this, I get output form whole 5.1 system, but the Input signal detected by AVR is only
a 2 channel input. I believe my Marrantz is taking the uncompressed stereo and converting it into 5.1 output. This is also the case with the videos I played back through chromecast. Is this pure surround or just a lot of sound from all the speakers.

In contrast, if I select 5.1 uncompressed in audio setting in XB1, the input is detected as 5.1, but output is only from front, center and sub. I am getting super confused.

Most TVs dumb down incoming surround-sound audio signals to a stereo when outputting via it's optical out, unless the signal is from it's internal tuner.

So in basic English, if you plug a surround sound device into your optical in on the tv, it converts the surrurant sound signal to stereo. If you want to get surround sound from your Xbox you need to plug it in to a receiver or another device that will
not down convert the signal.

here is a good article to read:
www.cnet.com/.../20-tvs-tested-which-sets-can-pass-surround-sound-to-a-sound-bar

I have this prob on my TV as well, so I use a Sony Receiver or my Turtle Beach headsets, that have surround or simulated surround.

Sadly Element is not known for making high end devices and this is an issue that plagues most TVs except the high end and very high end, and even then it's a feature that still does not appear to often.