I am a new owner and apoligize for the rookie questions but there is no support on the weekends

none of the diagrams show hdtv cable source or game source

My thoughts:

hdtv input (from cable component) to video 1 component
xbox input (component) to dvd component
dvd input (s-video (my dvd is old)) to video 3

does this make sense?

What is better digital or optical audio?
I have always used digital but wonder why there are 4 optical connections

also, is it better to go dvi direct to tv from cable or component switched to tv?

thankyou thankyou thankyou

ras