See if you can find Rachael's primer on page 2 of the "read this first newbie primer" that Vince set up, lots of good model info...I can't seem to find it right now...
Optical outs will pass DTS/PCM only, RF out is needed for DD on LD, plus a DEmodulator either built into the AVR or a stand-alone unit ($100 +).
I have an old RCA (Pioneer) that has L/R analog outs only, but the stereo 2 track digital audio on most LD's is uncompressed CD-style PCM, and the pro-logic I get from that is fantastic! Much better than I ever imagined.
I paid $50 for it. I would heartily recommend an LD player for anyone who likes HT. I like it better than my DVD's right now.
If you're buying the player for Star Wars original trilogy and/or the Indiana Jones movies than don't bother with AC-3, none of those discs have it and it can get very expensive very fast. Dual side play is very nice if you're watching a lot of LDs but for just a few it is an expensive luxury IMO. It's not that tough getting up and switching sides, and all these movies have multiple discs so you'll be getting up to switch discs anyway.
I would recommend a simple single sided player. Older models worth considering are the Pioneer CLD-S201, CLD-M301, CLD-M401 (has digital out). If you can get one for cheap, any x01 - x03 model would be great. These do not have AC-3 output so they are less sought after and less expensive. The CLD-D models have dual side play, CLD-S are single side players, the CLD-M model have multi-CD players.
The best basic single side player is the Pioner CLD-S104. The S-304 is excellent as well, but rare. It's a 104 with Karaoke and AC-3 output.
The x04-x06 models all have AC-3 output except the aforementioned 104.
Don't be too hung up on a digital out either. These players have passable DACs and the sound you get even from the analog outputs will be better than anything you've heard from any other source except DVD PCM stereo.
The picture will be not as good as non-anamorphic DVD, but much much better than VHS.
Pioneer is the best brand when it comes to players. Most other brand players (RCA, ProScan, Mitsubishi, Denon, etc.) are clones with three notable exceptions:
(1) Panasonic players. They are good, as good as Pioneers. Definitely worth seeking out. No AC-3 except on one model.
(2) Sony players. Very troublesome but there are some good examples out there. Avoid the MDP-650 it has a horrible picture. Years ago I replaced my cheapo Pioneer CLD-S201 with an MDP-650 top of the line bells and whistles Sony. For three times the price the Sony had a noticably worse picture. I replaced it two months later with a Pioneer 704 the Mack Daddy of LD players. If you can get a Sony real cheap it's worth trying. Even the low end models have optical out.
(3) Philips players. I don't know much about them but Rachael doesn't like them so there you go. I remember seeing GoldenEye on a demo Philips player at an outlet back in '95 and it looked damn good to me.
P.S. The At-Ats on the DPL "Empire" opening battle scene shake the whole f**king house. Fantastic demo scene. Big hit at local meets.