Here's what I am running...60" Sony XBR2, Onkyo 605, Mirage nanostat 5.1 w/sub, Xbox 360 Elite w/HDDVD Drive. I have my cable box running via HDMI into the back of the TV for viewing/without surround. I have it hooked up via component to the Onkyo; the 360 is connected via HDMI to Onkyo; then the onkyo feeds to the tv via HDMI.
Some issues
HDDVD picture looks darker now that it runs through Onkyo...does this get corrected at tv or at receiver? I have 2 sources Cable/Xbox going from Onkyo to 1 input on the tv via HDMI.
I used the auto calibration for the speakers and everything sounds good except the rear surround...not as loud as I would expect...any way to improve this? I had a Sony HTIB and I hate to say it but it sounded better...I'm sure I have something set up wrong or something
To improve picture quality/simplify should I run all devices to individual inputs on TV(this thing is loaded for bear) and just run an optical out to receiver? I initially tried setting everything up like this but was unable to get sound working...again sometimes I am a douche bag with AV hookups.

This should get things started...any help appreciated...more questions to follow:(

Just note that the 605 isn't likely to give you better video scaling than the TV itself (my 605 scaled worse than the TV) so you probably wouldn't lose anything by connecting video to the TV except for some switching convenience.

When you say the surrounds are down in volume, does that mean they are down when movies are playing or when the tones are being generated during setup? If the former, that is normal. If the latter then go for a manual setup. My 605 had a nasty habit of randomly changing the volume individually in the surround channels. It bugged me enough that I turned down the surround channels a lot to end the distraction. Check to see if yours is doing that.

The scaling is really too much of a concern for me...I find myself living in the high def channels anyway...I have tried automatic and then setting the tuner to 720...didnt really see a huge difference, but picture quality or image from hddvd is a concern. I just watched American Gangster the other night and the shadows seemed darker than usual. After a little research, art of my sound "loss" may be due to the fact that my hd dvd drive is the xbox 360's. I don't think I am getting true dolby digital in the transfer.

Maybe I'll get lucky and pick up a hybrid drive cheap because the blue ray won't be upgradable to v2.0 and this will be a mute point.

I actually messed with the manual setup today and it sounds better...not ideal but better