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To connect my Sony STR-DE197 to my Samsung Flat Panel television, I use the audio out on the television. Red and White. RCA jacks I think they are called. I connect that to the rear of the receiver. Right?
Since your receiver is a stereo unit, that's all you can do. But, if you have a cable/sat box, you should run the cables from it to the receiver, instead of from the tv.
Yes, the newer and better surround receivers use HDMI to connect to the tv. Also HDMI from HD cable/sat box to receiver, and HDMI from blu ray player to receiver. If you get a blu ray player now, you'll need to run HDMI from the player to the tv, and the red & white RCA cables from the player, to the receiver.
You really need a new system, with surround sound. It will make your movie viewing experience so much better. Something like this will work great:
http://www.amazon.com/Onkyo-HT-S6200-7-1-Channel-Entertainment-Receiver/dp/B002C73WS6/ref=sr_1_1?ie=UTF8&s=electronics&qid=1268527357&sr=1-1
If you want to get something better, you can get a receiver like this one:
http://www.amazon.com/Onkyo-TX-SR607-7-2-Channel-Surround-Receiver/dp/B001VEI2KO/ref=sr_1_3?ie=UTF8&s=aht&qid=1268527346&sr=1-3
and get some good speakers and subwoofer. To get
good stuff, it will cost a little more than the HTIB (home theater in a box), I linked to, but it is worth it in the long run.