have 1080i dvd player why need reciever with HDMI?

1. Been looking at my options for surround sound all the new recievers have HDMI input and outputs...does using the HDMI input on the reciever from the DVD player eliminate having to have an upconverting dvd player?
2. My player only has left right audio outputs, does hooking the HDMI cable to the reciever now give me 7.1 surround sound?
3. From the reciever HDMI output do I then run the cable into the TV ? Duhhhh .

Can someone explain to me how this works
Thanks