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standby light flashing means that it has had a thermal meltdown given that the onkyo can not be that old i would contact onkyo support because our model should be under factory warranty
1-disconnect subwoofer first and test-and then disconnect surround speakers-and front speaker after-and later center speaker.ever time you disconnect you check the operation until you find the bad one(or two)which make the problem change its cable first and then change speaker itself.if all above failed contact the service center.
Turning any receiver off will erase the settings - there is no backup battery (Onkyo uses Battery Free Memory Backup) and the length of time depends on the capacitor charge. Why not just leave the receiver plugged in? Stand-by mode uses a negligible amount of power - enough to keep the capacitors charged and the LED on the front panel on.
I just read over the problem you were having with your Onkyo TX-SR500 receiver. It sound like the unit needs to be setup for all five channels.Sence your symptom says the diplay shows Dolby D3/2.1.
According to the owners manual with the remote control look for speaker setup whin the button is pressed the current speaker setup will be shown in the display. Press the preset/adjustment<> to change the current setting to five speakers. the listening mode will automatically change according to the number of channels you selected.
Hope this helps.
Radiotech
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