OK, more testing. You can change it to just "pcm" and that will create the iso. "lpcm" does not work and I have not determined what the "l" stands for. I will experiment using just "pcm" and fix the Manual document.
There is also a second line in dvd.sh containing "ac3":
<audio format="ac3" lang="en"/>
Shouldn't also "ac3" in this line be replaced by "lpcm"?
If I do so, running the script results in
INFO: default video format is PAL
ERR: Cannot parse audio option 'lpcm'
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dvd.mpg is created and looks ok with lpcm included
But the iso is empty!?