The optical solution with HDMI picture works fine. I've been waiting out the HDMI AVR saga and use this set up. Lip sync can be an issue since you are seperating the paths of the image and the sound. Not a big deal expect for RP displays, as I understand it.

Panny 3000 PJ, 118" Carada, Denon 3300, PS3, Axiom QS8, PSB 5T, B&W sub, levitating speaker wire