I have no explanation, but since I have no source media like yours I can only suggest the following if you haven't already tried these things. The 2/2.0 signal is not listed in the table of suround modes in the SP-1.7 manual so perhaps it's just a fluke that it somewhat works.
If you have the gear, perhaps you could run the SP-1.7 sub-out to an amp and then to a more-or-less full-range speaker (be cautious !!!). Then try playing with the large and small settings of your rears to see what signal you get at the "new" sub. You could also try varying the SP-1.7 sub crossover, specifying no sub, setting the fronts from large to small, etc.
I'm just curious as to whether the rear channel's are being sent to the sub somehow. If you have an active sub you might not know because of the sub's built-in crossover. If you have a passive sub, then never mind this suggestion, because if the rear channels are going to the sub by mistake then you will hear some pretty nasty noises.