If you have only cable and a single disc player, I suggest hooking all video signals directly to the display and only audio connections to the receiver. If you have more input devices (e.g. computer and gaming system) I urge that you raise your budget for the receiver.
When using analog video (i.e. component video), it's best for signal quality to minimize the total number of intermediate connections (i.e. connect analog signals directly to the display).
When using digital signals, the signal quality itself should be unchanged when there are intermediate connections. (There sometimes are HDMI sync issues, though.)
For convenience, it's best to send audio and video through the same control point (the receiver). Some (more expensive) receivers include component-to-HDMI transcoding, so if you get one of those, you'll need only a single HDMI cable connecting from the receiver to the display.
At your price point, however, transcoding probably is not available. As a result, you'll need additional component cables to connect the receiver to the display. Since you'll need to select different inputs on the display anyhow (component or HDMI) you will already have lost the convenience of a central video switch.