You are correct - since your TV has s-video inputs, you only need to use the s-video connection from your DVD-1600 to the 1070. If you have other sources that only have composite video inputs (VCR, for example), you can connect them to the 1070 via composite and the 1070 will transcode the composite to s-video.
no benefit to hooking the dvd player up to the 1070 using composite video cables
I was about to post this when I noticed the plural there. When you say that you have composite and s-video outputs, do you mean
component (separate red, blue, and green RCA jacks) and s-video? If so, my advise above still holds true - use s-video from the player - but the bit about transcoding might deserve some clarification. Composite (single RCA video jack, color-coded yellow normally) inputs will be transcoded to both s-video and component monitor outputs by the 1070, s-video inputs will be transcoded to both composite and component monitor outputs by the 1070, and component inputs will only be available at the component monitor output.