Some people would say using the TV as the switcher is better because it elimanates another switcher in the path...but I disagree for this reason. Why spend all that money on a pre-pro/receiver just to let it sit there. I've done a little testing and cannot notice a difference in video quality with the direct or the more 'indirect' method of using a receiver or other type of quality switcher.

And if you have enough optical/coaxial digital inputs to use them for both CD and DVD go for it!!! Otherwise, if you have only one, you HAVE to use it for DVD otherwise you will not get digital surround sound! Or if your question was simply 'which one is better, optical or coaxial digital' It simply dosen't matter, it's a digital bitstream of ones and zeros and however you get it there is fine. Funny how you can actually buy 'High end' optical cables...that makes me laugh.