I have one question, but I think you are already correct.
There is no need, to send your DVD audio to the TV then to the processor. You should be able to configure the DVD player to send the audio directly to your processor via the Toslink.
Alternatively, if your AVR allows, you could send both video and audio to the AVR via the HDMI and run a second HDMI to the TV for the video. However, this doesn't gain you anything except having to buy a second cable, unless you have a need for the AVR to switch multiple video sources or it does some upscaling that your DVD player doesn't do. Otherwise, many say direct connections are often better.
My question is, how is regular TV hooked up or is this just a DVD only system? Most people get their channels from a separate cable or satellite box. I ask because I can't see any reason why you would run a Toslink from the TV to your AVR unless you are getting channels directly from the built in tuner in the TV. Even if you were, unless you were actually getting multi-channel audio (5.1) through your TV tuner, there would be no need to use anything but your analogue audio outs. This would avoid any confusion with the two Toslinks going to your AVR.
I hope I have made sense. I'm not 100% sure I understood your whole setup and needs correctlyu.
