I've heard various arguments regarding optical and coaxial. There are some who argue in favor of coaxial over optical because of the need to convert the digital bitstream from an electrical signal to an optical signal and back, but in my experience I've found it difficult to actually hear such a difference - and particularly for undecoded Dolby Digital and DTS bitstreams, I question whether audible differences can even exist if the signal reaches the processor intact for decoding. There's even an argument to be made in favor of optical, at least in theory, since the optical signal is not going to be subject to electromagnetic interference or ground loops. I'd suggest using either, unless of course you move to the Model 997 and either of the players in question have HDMI - you may as well use it if it's available. As for picture quality, the choice depends on the source player. If it has HDMI or DVI output, you are probably best off using that as it allows the video signal to stay in the digital domain all the way to your projector.
Also I was told that unless I spend $400.00 for for an HDMI cable I would lose picture qualitly as well as sound.
I'm going to go out on a limb and say that you were told that by someone trying to sell a $400 HDMI cable. Did you ask why the sound would be adversely affected by using a less expensive cable to your projector when that portion of the signal path didn't include audio? And if they were suggesting $400 as a minimum for a standard length of HDMI cable, I'd set aside any additional questions and settle for asking them where the exit was...
The HDMI video spec was taken straight from DVI, which was developed for the computer industry where long cable runs were anything past about 10'. As a result, there is a 15 meter limit on cable length in the spec. Once you get up close to the 45 foot mark, you start to push that limit pretty hard. If you start to exceed the spec'd limit, you can see "sparklies" (bits of white signal noise that look almost like snow or white specks all over the image) or simply get no video at all. Since it's a digital signal, you should see and hear no degradation prior to hitting that point - so unless you run into an issue like that, however, paying more for an HDMI cable is a difficult purchase to justify.
A 40' HDMI cable is quite a bit of copper, so it's not going to be cheap - especially since it needs to be fairly heavy gauge to compensate for the length of the run and the spec's limits - but you can find one for a fair bit less than $400. I've had excellent luck in all of my dealings with Blue Jeans Cables, and they have
an assortment of HDMI cables that are well made and reasonably priced. I'd seriously consider their Series-1 for a run to a projector, because if any of your hardware ends up being sensitive to cable run lengths it's a nasty proposition to pull in a heftier cable later to compensate for that.