The CD inputs use RCA connectors so you are what you would connect to from your player for what you want to do right now. The BR player should have outputs on its back that are labeled R and L and you would connect the same kind of cable you use now with your CD player to the L and R CD inputs on your receiver if all you want to do is listen to music. If you want to use the receiver for movie sound, it would help to know what make and model your receiver is. Then we could help you figure out how to set that up with a Blu-Ray player for movie watching as well.
If you go to this web page (http://www.sherwoodusa.com/
) and select Products on that web site and select Heritage, you can see older Sherwood products. Is your receiver one of the ones shown? Which one? If not shown, could you tell us the model? It is usually possible to find old user manuals and/or pictures of equipment fronts and backs if you have that information. Also which Panny player do you have? There have been at least 2 that had 500 as part of the model number. It would help to know the exact model number, including the letter designations in that number.
Optical and coaxial cables are two types of cables that do the same thing. They allow you to take the digital signal that is on a CD (or other digital music source) and send it to another device for conversion into analog audio. All audio must end up as analog audio to be played through speakers or headphones. The way you are hooked up now, you are getting an analog audio signal from the player. Some devices only allow optical cables (a cable which transmit digital data as pulses of light). Others only coaxial (which look just like RCA cables but have a slight internal difference). Some support either.