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The pumping you can hear on DVD's is caused by the AC3-metadata. When encoding AC3 you can tell the home-user-decoder how to compress the signal. The default setting in any Dolby Digital AC3 encoder is to use it. You can ofcourse also turn it off.
The AC3 spec is also been thought out for digital television, and the compressor in the decoder (yes, it's in the decoder) is to keep the level differinces between movies, talkshows, commercials etc. under control.
That's why they also included the "dialog normalisation" parameter. If you search on the Dolby website you can find a pretty good indepth explanation of that parameter. I'll try give a short version here:
The "dialog normalisation" parameter can be set from -31db to -1dB. If you set it at -31 your audiolevels will be untouched. When you set it at the (default) -27 setting your audio will be attenuated by 4dB by the decoder (remember it's metadata). When it's set at -20 the attenuation is 11dB, etc..
The goal of this parameter is to level out the volumedifferences between commercials that could have the dialoglevel at an average of -6dB (I'm just making up numbers here) and movies where the dialoglevel could be at an average of -27db. And when somebody whispers in that movie, that's where the autogaincircuitry kicks in.
That may be very nice for digitalTV broadcasts, but totally inapropiate for DVD, where one would like to control that with their own expensive audiogear(-slutz).
I agree that DTS sounds better better then AC3, but it also uses a lot more bandwith, and for me that is often not an option when trying get 3 hours of video, stereo and 5.1 audio on a DVD. The video people who make DVD's probably don't know (or care) how to set the AC3 encoder, that's why AC3 mostly sounds worse then it could.
There are however DVD's that sound amazing, like the Led Zeppelin one or the Norah Jones one, Dixie Chicks one. But they use uncompressed for the stereo versions.
By the way, when you see a lot of pixelation on a DVD then that's due to a low bitrate for the video. But unlike the Dolby AC3-encoder, not all MPEG2 video encoders are created equally, and prices range up too $50.000 and beyond, while I think Sony has one that only they can use for their own DVD's. Ofcourse lower bitrates still look decent on these encoders.
Coen Thomas
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