Sound & Vid out of sync

[B1n0ry]

I have a problem with my HTPC playing DVDs. I'll describe my system as best I can, since I don't know where the problem lies:

PC is:
Duron 850 with 256Mb RAM, Sound Blaster Live! 5.1, nVidia TNT2 Video card w/ TV out.
Software is Windows 98SE, PowerDVD for viewing DVDs. All drivers seem fine, device manager looks OK (no errors)

This is hooked by SPDIF (coaxial) cable to a Kenwood receiver (KRF-V4060D)
link:
http://www.kenwood.com.au/home3.asp?...cid=34&pid=339

Sound and vision come through fine, but the sound lags the vision by about half a second. This cannot be corrected by stopping, restarting, pausing, etc.

Strange thing is, this seems to affect Dolby Digital ONLY (tested with 3 different DVDs).
I have Lord Of The Rings Special Edition, which has a DTS soundtrack, it works perfectly! Switch it back to Dolby Digital, instant lag!

I'm at a loss where to start looking. it would seem to be on the PC side, but where? Drivers for Sound Card? DirectX? DVD software?
Anyone seen similar to this before?
Any replies appreciated.
Help an Aussie out. Thanks.