IMO, you have it hooked up the "best" way. As long as you are bypassing any video processing in the Yamaha, I don't think you're degrading your video, at all. Switching HDMI through the receiver makes switching (and remote programming) much simpler and will let you get the best audio you can from a Blu-ray.
I don't think you'll need to worry about upgrading your video switching until 4K components are released.
I wouldn't worry about trying to get the ARC working through the HDMI. It's a pain in the butt, at best. Using the optical is perfectly fine.
Last edited by Shaner on May 25, 2015 22:10.