The video can run either through the 1070 or straight to the TV - although if you have any other DVI/HDMI sources it'll be useful to make use of the 1070's DVI switching. Does your Pioneer have an HDMI or DVI input? That's very much the preferred video output for the Oppo 971.

As for digital audio, there are arguments in favor of both coaxial and optical. Optical cables are immune to RF and electromagnetic interference, but you have to convert the data from wire to fiber and back. Personally, I've tried both and never been able to conclusively find a difference between the two.