I have a Pioneer 50" plasma (5080HD) with a playstation3 connected to it via HDMI for my blu-ray DVDs. I also have an xbox 360 and HD cable box connected via component cable.

I have a receiver WITHOUT HDMI connections. If I connect an optical audio cable from the TV OUT to the receiver IN, will I be getting the most out of my sound? Or is it absolutely necessary to plug each component into the receiver, and then have the receiver run into the TV?

I'm most worried/confused about getting 5.1 surround out of my DVDs...I'm assuming if I plug the old red/white RCA cables from the TV to the receiver, I won't be getting this. :(

Thanks for any help.

You're much better off connecting each component to the receiver separately for sound. This is, after all, the primary job of the receiver; to decode and amplify surround sound.

Most TVs that have optical audio outputs only transfer 2-channel PCM, which would mean that any surround sound you're hearing is artificially matrixed by the receiver from a 2-channel stereo source. To get discrete 5.1 or 7.1 surround channels, the receiver needs to receive either the audio bitstream or multichannel PCM directly from the source.

Also, no, if you plug in the red and white RCAs, you'll only be getting 2-channel stereo.

Dolby Digital/DTS signals can be transmitted by optical or coaxial audio connections. Higher-resolution audio, such as Dolby Digital +/TrueHD/DTS-HD MA found on HD-DVD and Blu-Ray, can only be transmitted by HDMI, unless it's decoded in the source component itself, in which case it can be transmitted by 5.1 analog connections (like the red/white RCAs, but with 6 connections/channels instead of 2) or HDMI. Trying to send those high-resolution signals by optical/coaxial results in them being converted down to either a DD/DTS signal, due to bandwidth limitations inherent in optical/coaxial connections.

Well sadly the salesperson showed me a receiver with HDMI inputs but downplayed the need for it...sigh.

So basically, to hear the 5.1 surround out of my blu-ray player that is connected via HDMI, I need a receiver with HDMI inputs/outputs, right?

If you play blu-ray discs in your PS3, then you are correct, you need a receiver with at least HDMI 1.1 inputs to hear the highest quality audio. However, if you just play regular SD-DVDs, or are satisfied with down-rezzed audio with blu-ray (but still 5.1 channels) you'll still get that with an optical audio connection.

I ran my PS3 for about 6 months with optical audio inputs before getting my Onkyo TX-SR805 receiver. The difference is very noticeable if you have a decent 5.1 speaker setup, but audio via optical wasn't really bad. It's just that the high-rez audio is much better.

Before I get ahead of myself, does it matter that I'm looking to stay at a cheap (~$550 or less total) HTiB system? I play both blu-ray and regular DVDs in my PS3, and really just want to have true surround sound. My dad has an old surround sound system where the channels aren't correctly separated and it never has sounded right to me.

The HDMI HTiB I looked at was a ~$500 yamaha system.

I appreciate all the help with this.

Honestly, if you're looking at a cheaper surround system, then using the optical connection would probably be just fine for you. Yes, you'll still get discrete 5.1 channel surround sound, from both SD-DVDs and blu-ray. Just make sure the settings in the PS3 audio menu are set appropriately.

I have a much more discerning ear than my wife for compressed vs. uncompressed audio. FWIW, I have $10,000+ invested in my audio equipment and speakers, and my wife can barely tell the difference between compressed and uncompressed audio, or even discrete vs. matrixed surround sound.

Honestly, while I have invested in both blu-ray and HD-DVD since their inception, I doubt even blu-ray, having "won" the format war, will succeed beyond niche status, and this is the way I've always felt (you can look at my post history if you don't believe me). I have mid- to high-grade equipment and can appreciate the differences in both audio and video quality, but my wife, who is a successful physician and very intelligent, while intellectually understanding the differences, can't tell and frankly doesn't care. I extrapolate that to the general population, who either doesn't have the equipment to appreciate HD appropriately, or just doesn't care enough to invest in it.

Regardless, enjoy your equipment, and don't worry about getting every last ounce of potential out of it unless you feel like you're missing something. At least the newer technology will work with older technology to some degree.

Thanks a lot for your help, I really appreciate it.