[black_eagle]

With speakers in Kodiu set to 5.0 this option doesn't show at all, probably a bug?

Nope.  DD (ac3) is 5.1 channel audio encoded into 2 channels.  So is DTS.  If you set the No. of channels to more than 2, then Kodi will be decoding any formats your AVR can't and outputting multi-channel audio to your AVR.
 

I wonder if the transcoded audio is actually a properly encoded all streams (surround)

Of course it is. 

See https://kodi.wiki/view/Settings/System/Audio

[darmach]

Thanks for clearing that up for me!

[borygo77]

This is mistake everyone doing. It should be set to 2 channels. I'm getting 5.1 on my avr when transcoding to dd.