My reports on how to import and export video with 5.1 channel audio in Premiere Elements without export error go back a long way (blog wise to April 2013). Consequently, it was discouraging in July 2014 to discover that the message had not reached some advanced as well as beginner users of the program at some other forums.
"Premiere Elements will support the import, but not the export, of Dolby Digital 5.1 channel audio. For Dolby Digital, the user is left with Stereo (2 channel) option for export to file or disc. But the program does allow for some very limited opportunities for export to file for 5.1 channel with AAC instead of the Dolby Digital codec. However, the latter errors out at export with the following message
The source and output audio channels are not compatible or a conversion does not exist.
unless a project preset (New Project Dialog) was selected for the project that has 5.1 channel incorporated into its sqpreset file in the Program Files"
The export findings were extended to include a Windows Media Audio 10 Professional 5.1 channel audio as well as the AAC 5.1.
The details are found in the following blog posts along with some commentary on explorations and experimentation on how possibly to import stereo and get out 5.1 channel from a Premiere Elements project. (See the Discussion in the second of the 3 links below.) The blog posts are free (no ads and no registration, just my observations as I work with Premiere Elements). Please give them a look to determine if they work for you as they have worked for me and others.
Any questions or need clarification on any of the above, please do not hesitate to ask.