Right now I have my set up as HDMI for video and optical for sound, but the HDMI carries sound, but is it as good as optical?

HDMI is definitely better than optical, since it can handle the HD lossless sound formats like True HD and DTS-HD-MA, which optical/coaxial connections can't due to lack of bandwidth. Of course you'd need a receiver that can decode the HD signals as well or use the multichannel analog outs.

All you can get with optical coax is your regular Dolby Digital and DTS core formats.

alright. so from my PS3 I do HDMI to my receiver. From my receiver I do HDMI out to my TV. This will keep the sound within the receiver and only video to the TV right?

Depends on the settings and set-up.

Is your PS3 set to bitstream or PCM? I dont know all of the other PS3 settings as I havent changed them in 2 years.

Those are still the only two options, as the PS3 decodes the HD audio formats internally and sends it out as PCM to your HDMI receiver.

The receiver will (as you said depending on the setting) output the audio from the PS3 through your HT speakers and if you want to, also from your television, but there's no point in outputting the sound to the TV because if you did that, the receiver would still have to be on, and you would hear only the left and right front channels of the 5, 6, or 7.1 mix through the TV itself.

Yea what you do is have the HDMI going from your PS3 and other devices such as Cable/sat boxes etc to your audio reciever. The you go from your reciever's output to your tv input. You need to go to tv for the video feed but the sound will be handled by reciever. This makes it easy cause if its done like this you never have to change the input on your tv its all done via reciever.

IF the receiver upscales via HDMI, then you don't have to change the TV's input.

Mine was inexpensive (cheap) so it doesn't upscale. I have to switch inputs depending on the connection from the receiver and components being used.

Yes. Most, if not all, receivers will not pass the audio to the TV if decoding it and playing it through the HT speakers. Some people have complained about this because they sometimes want to use the TV speakers for material they don't deem worthy of the HT speakers (like the news, sitcoms, etc.).

There should be a setting in the receiver to toggle whether the audio is handled by the receiver or passed to the TV.

great; thanks for the info

Funny, my cheap receiver does have the option to pass through sound to the TV or not to pass through.