Klipsch CS-500 and multiple HDMI devices

Here is what I am dealing with guys please help me understand what would be the best lay out to produce the best sound over all my viewing options.

equipment:
Sharp Aquos LC-42D64U
Sony Playstation 3
Klipsch CS-500
Comcast HD cable/DVR box

At first I saw that the Sharp had an optical out so I was going to hook everything up to the sharp via HDMI and send audio to the Klipsch reciever via the optical hook up (There is only 1 on the reciever).

I set the digital audio setting on the TV to Dolby Digital.

This worked fine with the Comcast cable but I was not able to get the sound from the PS3. This has me confused because both the Set-Top-Box and the PS3 are connected via HDMI and I can get the sound from the cable to go through optical but not the PS3. (Any help on this would be appropriated, I am guessing it is a setting in the PS3)

I am trying to avoid connecting anything via RCA cables but I did try connecting the PS3 to the CS-500 directly with the optical cable and having the HDMI only do the video. Then used the RCA outputs on the TV to route the cable sound into the CS-500. (this is where my knowledge of sound is very novice. I don't know if that is a bad thing or if my sound will suffer tremendously because I am taking a digital signal and converting it in my TV to an analog signal and sending it to the receiver hoping to get good sound.

I tell all you this to simply to let you know what I have tried and to get recommendations on the very best set up for all my components.

PS3 audio settings
There are multiple choices under PS3 audio settings (which says select all output formats that are supported by the audio device in use) but when connected via HDMI to my TV it automatically selects

Linear PCM 2 Ch. 44.1 kHz and
Linear PCM 2 Ch. 48 kHz

Then I have also selected
Dolby Digital 5.1 Ch

But it gives you many more choices. Here is a link to what I have control over via the PS3 audio (it wouldn't let me post a link because I don't have three posts yet, so copy and paste the following - http://manuals.playstation.net/document/en/ps3/3_21/settings/audiooutput.html"]http://manuals.playstation.net/document/en/ps3/3_21/settings/audiooutput.html

To answer your second questions. The comcast box does not have a DD 5.1 option or at least not one I could find. Currently the the cable box selections are Low compression and Advance (which is what I read online to select for DD 5.1)

The TV has a digital audio choices PCM or Dolby Digital. I selected Dolby Digital.

On the Klipsch Reciever. It has three options DD off, DD Ref, or DD Wide. Currently I have it set to DD wide due to my small room size.

Does this help answer the question? If I am doing this all wrong (which is highly likely, just let me know).

UPDATE* I have been researching this all morning long and its possible the optical out from my TV only sends a DD5.1 from the TV digital tuner and does not support HDMI audio pass through to the optical. I don't know if that is true or not but maybe someone could confirm for me. I don't know if there is a firmware update that would allow for the audio to pass through or not? My current firmware version is s0803271 on my Sharp TV. Just sharing more information. Thanks in advance for all the support and help

Great! Thanks for the info. Thats exactly what I am going to do.