I apologize in advance for the terribly Newbie-esque question. Can someone explain how best I should set up the following gear?
*Outlaw 990 / 7125 combo
*Panasonic 50" plasma (HDMI in / outputs)
*Panasonic DVD Player (HDMI outputs)
*Cable directly plugged into TV (No cablebox)

I am guessing I need to run an HDMI to DVI cable, as well as an optical audio cable to the Outlaw from the TV. Then another HDMI to DVI cable and optical audio cable from the DVD to the Outlaw. Can someone confirm?

if i were you i would run it like this:
DVD player to 990: HDMI->DVI cable w/ digital cable
TV to 990: Stereo RCA cables (assuming it doesnt have digital out)
990 to TV: DVI->HDMI cable, no need for audio unless you view with only television speakers

this way you would utilize the 990 for both television broadcasts and dvd viewing

There are plenty of ways to do this.

First approach: Run HDMI-to-DVI and optical from the DVD player to the 990, DVI-to-HDMI and a composite video from the 990 to the TV (composite for access to the 990's menus), and either analog stereo audio or digital audio from the TV to the 990. That last one is for audio from the TV's cable tuner, and if you can use optical or coaxial digital I'd recommend it.

Second approach: Run HDMI from the DVD player to the TV, optical from the DVD player to the 990, composite video from the 990 to the TV (for access to the 990's menus), and either analog stereo audio or digital audio from the TV to the 990.

Either approach will work equally well, but the first will allow you to add a second HDMI or DVI video source to your system without adjusting cables at other equipment. You could also substitute a component video connection from the 990 to the plasma if you anticipate adding any analog video sources (game consoles such as Xbox360 or Wii, for example).