Here's how I got 5.1 channels of audio out of my Ubuntu Hardy (8.04.2) PC using VLC (0.8.6e Janus).

First off, I'm running a SoundBlaster Audigy 2 sound card (which replaced my original card after I gave up trying to troubleshoot it).

So, after much Googling, sifting through forum after useless forum, and even more trial-and-error, I finally stumbled upon a solution that worked. (Honestly, those forums... To all the people out there who have had this issue and received not a single response or straight answer from anyone, I feel your pain!)

Anyway, here it is:
1. As mentioned earlier, I installed a new sound card that was instantly recognized by Ubuntu, God bless it. I didn't have to fuss about with drivers or packages...
2. I fired up the computer and the sound system.
3. Opening up VLC, I went to Settings-->Preferences... and expanded the Audio option on the left-hand column. Then I highlighted Output modules and checked the Advanced options checkbox on the lower right-hand corner.
4. With Advanced options activated, I was then able to see the Audio output module pulldown menu. I chose ALSA audio output and clicked Save.
5. I loaded up my video (in this case a DVD).
6. Under Audio-->Audio Devices, I selected 5.1 and lo and behold, Let There Be Sound!*

*Note: When playing a commercial DVD movie, wait for the main feature to start before completing step 6. Most standard DVD menus and trailers are only encoded in 2 channel stereo, not 5.1, thus the 6 channel (5.1) option won't yet be available.

One last thing: I can't seem to get VLC to remember these settings after I close the program, so I'm forced to go through these steps every time I load it up. Does anyone have a fix for this?

Cheers,
-Kp