optical vs. digital vs. analog HT hookup

Need advice on optimal HT receiver hookup; dvd (pioneer 525)thru receiver with digital or optical or analogue cables? and does the choice influence use of s-video cable? also, will my parasound 1000 used as a transport take advantage of the 96/24 dacs in the receiver or should i bag it and use the dvd?
I'm not familiar with your pieces,but I can offer some general advice/info.Toslink digital links cost around 29 dollars.Try some/or one.In a better system they are not too good,and I would avoid them.Try to borrow(Cable Co loaner?)a decent 75 ohm co ax cable to see if it makes enough dif.Your local hi end dealer might lend you one. The 24/96 dac should improve the sound of ALL your cd's;but,pop the same cd in each transport and see how they compare.(using the same dac/and digital cable)There is no interaction between audio and video cables.S video should be used over composite/and component over s vhs. (If your tv and dvd player are equipped for this type hookup) Clear as mud?
For 5.1 you need a digital cable. Don't waste your time with opticals, there have been dozens of posts going into it before. Just buy a coax. They have nothing to do with your video signal. Try both the Parasound and the DVD player, and pick the winner. My Pioneer DV-05 sounds best direct into the Denon AVR-5700 DACs', despite good reviews of the "Legato Link" processing in the DV-05.