Do I connect video out thru receiver or to TV?

Glad we could help Sailinfla. What Edesilva may be referring to is the difference between composite and S-video in that S-video separates the color and picture detail into two different carriers whereas composite does not. I have noticed a big difference in picture quality in certain applications between these two methods. The S-video was brighter and more detailed, while the compsoite signal was darker and plugged up in the shadows. But, the difference between component video and S-video seems to be much narrower as you've found.

As for which is better, optical or coax for your digital audio? Well, although I built a home theater system before I built a 2-channel music system, music reproduction has displaced HT as my true passion. And it seems audiophiles almost always choose a coax digital connection over an optical one with the exception of when using a CD changer because often times optical is the only offering with these units. I know that Bel Canto Designs promotes the use of optical cables when using a DVD player as a CD tranport when hooked into their DAC1.1, but I've heard many owners of the DAC, which I am, mostly prefer the results when using a coax cable.

But this really all comes down to personal taste. If you can, I'd suggest you borrow both types and compare them.

I just retired a Denon AVP-8000 preamp and used its internal switching with S-video cables as a convenience. On my EAD preamp I replaced the optical connection with a good coaxial cable and it sounds much better.
Entech (Monster) makes a neat little product (Director AV4.1) for S-video (which can be adapted to component) but I just got the JVC JX-S777. It does S-video and composite matching as well as having component and digital I/O. I wanted something where I could record from Direct TV to TIVO, then to a VCR if I liked the program. Still playing with it.
The audio RCA connection should go to the receiver so it can amplify the sound and do home theater for you. When I tried to connect Direct TV to the TV but run the audio thru the preamp there was a slight but noticeable delay in the audio.

My post may have been a bit confusing, but its kind of irrelevant if you aren't going to use anything but component video and s-video. The canonical line is that component (R, G & B RCA connectors) is the best video link, so it makes sense, if you have component outputs on DVD and SAT to run them directly into your TV. (I haven't seen any A/V receivers that actually "switch" component video). A/V receivers that have both s-video and composite video (single Y RCA) typically don't convert between transmission formats, so if you have s-video going from your A/V receiver to your TV and composite video only from your sources to your receiver, you won't see anything.

So, if you have both s-video and composite sources, you need to run both s-video and composite to your TV from the A/V receiver. A lot of TVs have "auto-sense" that detects which inputs have incoming signals and automatically switch to that input. On some other TVs, however, you may have to manually switch from the composite input to the s-video input--hence playing with the TV remote in addition to the receiver remote. You know, the "TV/VCR" button on your TV remote.

The Casablanca is basically an A/V preamp made by Theta Digital. Even though its state of the art/high end/quarter inch aluminum plate gear, it still doesn't switch component video. So, for example, I run the component outputs of my DVD directly into the TV. Since my TV is an XBR with god only knows how many outputs, I have to switch the TV to "video 5" when watching DVDs, and switch the Casablanca to the DVD input to get the sound. This is where my Pronto comes in. Its a programmable touchscreen remote control where you can create graphic screens and associate macros with buttons. So, the "DVD" button on my Pronto switches the TV to VID5 and the Casablanca to "DVD". One button only. Means I only have one remote on my coffee table and the other eight in drawer in my study.

Good luck!

The Denon 5803 "converts" all video signals (svhs and composite) to component out. It is the only one I have seen that does this.

I am trying to dig out a whitepaper on how it actually achieves this though......