DCR, bear with me here as I'm really not up to snuff on this stuff... You mention above that "I have the HDMI cable from my TV to the Xbox"... However, I believe I don't. I currently have the Xbox connected to my Denon receiver using the component cables (Red, Blue & Green), and the audio cables as well (Red & White). I'm at work so I can't check, but if I recall correctly, the Xbox 360 allows for the HDMI connection direct from the Xbox unit to my receiver. As you correctly stated however, my Denon receiver does not have a HDMI connection, but it does have the Optical connection. This configuration does in fact allow me to run the Xbox in 1080 and the sound does play through my surround sound. With this the case, what exactly would the HDMI connection do to either the picture quality and/or the sound??