For starters, the HDMI Override needs to be on.
I can't see you are doing anything obviously wrong. I'm a bit confused though. I've looked up the manual for the BDVE370 (
here), and according to that it doesn't have any HDMI inputs. Can you confirm that's the right model?
One possibility is you are watching programmes that simply don't have Dolby audio. To test, the 'Preview' shown when BBC HD is off air is a good place to guarantee getting Dolby. They even show a Dolby testcard periodically.
ps. Welcome to the forum!