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^^^^ Don't understand any of that... ARC is not the same as optical, so once ARC is off...no need to mention it. The TV does not have digital input, so I can only assume you meant digital input on the Panny HTiB. When the Panny HTiB is on digital input... And the TV is set for Optical output...

By the way, turn off the Simplay and Viera link... Then try the optical cable. It could be that the "default" inside either of them when you turn the CEC on is to use ARC. But if the ARC is incompatible...there is no sense in using it... When they are both "off" the optical should then work...

Well, it is possible LG and Panasonic don't play nice together... ARC is dependent on HDMI CEC to be on. Maybe Viera link(what Panny calls it) and Simplay(what LG calls it) don't work together in this instance... Won't be the first time...

Weird... This TV does support ARC, correct? Most TV here in the US list it in the "features blurb". I'm not downloading a 25k file(owners manual) just to see...

When you turned the speakers "off"... Did you turn the volume up? There may also be a setting for fixed/variable...set it to fixed. The "turning the volume up" is a common thing to miss...as I've seen owners manuals not mention it...