Depends on what you mean. There is Dolby/DTS laced PCM that is multi channel. Those won't work. E17 only supports Stereo PCM
But ones who uses a software to add the special effect into the stereo stream (be it stereo or multi channel) will work.Those aren't too high quality though and have very fake sounding spaceyess
As bowei mentioned (and I mentioned earlier), the E17 doesn't support multichannel audio. The digital inputs can only handle stereo PCM input. When I watch a movie or tv show that's been encoded in multichannel, I just make sure the software I use is set to downsample to two channel PCM stereo. Admittedly the soundstage isn't anywhere near the same as watching on a full 7.1 or better surround setup using speakers, but the performance is still quite amazing actually. Downsampled multichannel audio is pretty impressive when done well.
As we also mentioned, I wouldn't bother trying to use effects processors to overlay a pseudo-surround stage onto the downsampled two channel audio. Software DSP like Dolby Headphone or DTS Neo don't do a good enough job in re-creating the surround stage. Another option that I've occasionally used is the JVC SU-DH1 headphone processor and that does decode Dolby Digital and DTS via hardware DSP into a decent 2 channel headphone mix.
Using this unit I connect it as follows:
SPDIF digital out (TOSLink Mini cable) ----> JVC SU-DH1 ---> E17 Aux In or E9 Line In as Amplifier ---> Headphones
This allows me to decode Dolby Digital 5.1/DTS 5.1/Dolby PL II/MPEG-2 AAC into one of three separate Dolby Headphone modes, and also allows me to further customize the soundstage by selecting auto, movie or music mode. The gotcha is the mess of wiring needed to make it work. I've got a picture somewhere of it fully connected to my MacBook Pro and it's somewhat overwhelming with the ac adapter modification I made so that I don't have to power my SU-DH1 by batteries. If I find the pic, I'll post it. One other things about the SU-DH1 - it's very hard to find and purchase but only sells for $100 to $150. I bought mine for $120 if I remember correctly. If you really want a decent surround soundstage, this is a decent option. That said, it's as much as buying the E17 by itself, so for most it probably isn't worth it. I'll admit that I rarely use the SU-DH1 but occasionally it's fun to hookup and watch a show or two. Most of the time I'm content watching my movies and tv shows with downsampled 2 channel audio through the E17/E9 combo. Now that I've thoroughly confused you, fire away if you have more questions. :D