I was told to hook up my DVD with component cables and audio cables to my HTIB receiver and then run the S-Video cable from the DVD directly into my HDTV... Did this, looks decent. However, I was thinking that maybe the component cables should be connected DIRECTLY into the TV, the 2 audio cables into my receiver and no need for the S-Video...

My DVD and HTIB also have digital output/input connections. This really throws in confusion on the optimal set up...

Please, any advice on the OPTIMAL hook up will be appreciated...

Rocket69

Correct. Component directly to the tv, forget the S-Video. Not sure what two audio cables you mean, red and white? Use an optical or coax for the audio going to the receiver from the dvd player. If you want dvd player sound on your speakers (for whatever reason) then use the red and white to the tv.

What Brian said, component directly to tv and optical or coax to HT receiver.

You might also run the red/white audio out on the DVD player to an audio in on your TV (if you have it). This will let you watch DVD and listen through your TV in case for whatever reason you don't want to fire up the surround sound (some sleeping near by or whatever).