HDMI and digital optical out?

You can buy a $50 Microsoft HDMI adapter kit which will come with a thin stereo/optical out audio dongle. Or you can break off the plastic casing around the AV/Component cables that came with the system and plug it in.

It's definately a design flaw but they do have a 50 dollar fix. I don't know why they don't give this to you with the Halo box, it was packed in with my Elite.

Go here. http://www.gamestop.com/product.asp?product%5Fid=802758

I've seen people hack up their cables to get them to fit so that's possible as well but hey... what's 50 beans to a gamer... right ??

Because MS likes to nickel and dime (or in reality $50 and $100) their customers to death. What you want a hard drive? Fine $100 for 20gb or $180 for 120gb, O you want wireless to? That'll be another $100, hmm what's that? You want to be able to output audio through optical and video through HDMI like every other device you own? Well sorry we didn't build an optical out into the 360, even though it's something we should have started implementing last generation, and we "accidently" made that component cable we gave you just big enough (read comically large) to block the HDMI port, but all is well and good just give us $50 and you can have a poorly built HDMI cable and an adapter that should have come with your console.

Thankfully you can just pry apart the plastic casing on your OEM component/composite cable and it should give you enough room to fit an HDMI cable so you don't have let MS screw you once more.

A quick tap on the casing with a hammer broke it open for me. It works great.

DDUUUUUUUUUUUUUUUUUUUUUDE. Do a search. You can easily mod the component cable and it works perfect (remove plastic, remove component wires leading to plug, bend housing upward, voila!! Thanks to johnny somebodyorother for the tip)