I have a Philips 49PUS6401 Android TV hooked up via optical to an (ancient) Philips AV Receiver FR965. Also have BT TV and Blu-Ray players connected and it supports 5.1 in Dolby Digital and DTS perfectly.
Thought I'd try Disney+ running on the TV and was disappointed to find that I could only get downmixed PCM stereo. Checked online and found various reports on Reddit that the inbuilt app didn't support surround over optical, and I'd need an HDMI amplifier to access the surround channels so assumed it was a no-go.
This morning had a brainwave - how about casting Disney+ from my Android phone to the built-in Chromecast on the TV. Amazing Dolby 5.1 worked over optical!
Not sure that I was getting 4K, so I thought, how about running the built in Android TV app again - now Dolby 5.1 was still working in 4K with HDR.
Now a happy bunny!
The heart of the issue is that online streaming services only stream in Dolby Digital Plus (EAC3) these days and you can't send a EAC3 audio stream over optical (optical only supports Dolby Digital, DTS or Stereo PCM). And since it appears (based on the manual ) that your TV doesn't have an option to convert the multichannel signal to Dolby Digital (AC3) you are just getting a converted PCM signal.
I realize you are trying to help others in this situation but in all honesty for yourself or anyone else in this situation replacing your aging AVR with something slightly more up to date is probably the best bet. You can probably pick up a used AVR on Facebook Marketplace for pretty cheap (just skip Yamaha since they don't support EAC3 over ARC where most other brands do).