I actually bought a 1708 and returned it the very next day. No, it does not output analog over HDMI and no, it does not process audio over HDMI. The only thing it does, as far as I could tell, is switch HDMI video. Also the sound quality felt a lot to be desired, such that my 7 year old Pioneer theatre-in-a-box receiver sounded better.
I ended up stepping up to the 888 (2308 minus second remote) and have been much happier since.
PS, I'm pretty sure the 1708 will upconvert S video to component, it just won't upscale it.