If anyone has any advise on some systems that are affective and are the best bang for the buck, please let me know. i appreciate anyones advice!
Joe
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If the Onkyo has enough digital audio inputs to support all of your connected devices, then yes, you can simply use the Onkyo as an audio switcher, and route all the video signals via HDMI directly to the TV. Hopefully this is what you meant by "switching". If per chance, you were running audio and video via HDMI into the TV, then audio out from the TV to the reciever via a digital optical cable, then that doesn't work - you only get stereo.
What HDMI provides is 1080p video, and a means (other than analog audio cables) to transmit the lossless audio formats of Blu-Ray over a single cable. If neither of those are requirements for you at this time, then there's little reason to upgrade. The Onkyo 607 is a great, inexpensive HDMI 1.3 repeater reciever that is a great option if you decide that an upgrade is worth it.