Do you NEED to? No. The information on the disc is digital. That digital information must be converted to analog information at some point because that's what your amplifier and speakers need. By using the 5.1 cables for everything, you are forcing the Oppo's Digital to Analog Converter (DAC) to do this conversion from digital to analog. If you connect a digital cable (either coaxial or optical), you are sending the digital signal to your controller, and IT'S DAC does the digital to analog conversion. Though I don't know for sure, I suspect the Parasound DACs are superior to the Oppo's DACs.
Also, on most receivers or controllers (preamplifiers) using the 5.1 analog inputs bypasses a lot of the signal processing normally performed by those units, such as speaker size and distance, and sub crossover (these are often lumped into the term "bass management."), relying instead on the player to do this processing.
The Oppo has limited bass management. You can set speaker size and some distance settings (Channel Delay) on the "Speaker Setup" page of the setup menu, but these settings are limited. If you intend to use the Oppo's 5.1 analog outputs for movies and/or to play DVD-As, you should set the "Downmix" to 5.1 CH and go through these settings.
My recommendation is to hookup a digital cable and use that for DVDs, which enables you to utilize all the processing available in your processor. I'd hookup and use the 5.1 analog outputs ONLY for DVD-As.
