I follow you right up to the end.
You're telling me to hook up the PS3 & DirecTV to the HDMI Switch and then output it with a HDMI to DVI cable to the DVD DVI input?
I'm suggesting that you bypass the 970's DVI switching entirely and go straight from the separate switch to the TV. That allows for easy audio switching. If your HDTV has two HDMI inputs, you could even drop the switch entirely and run both sources directly to the TV.
I'm not clear what the benefit of using the coaxial audio output instead of the optical as I still have an open optical audio output. Also, how am I going to get a picture if I select Video 1 for DirecTV if its hooked up to the DVD DVI input?
You have for optical inputs on the 970, but one of them is on the front panel. Since the DirecTV box is the only source you have with a coaxial digital output, that becomes the one that has to switch to one of the three rear coaxial digital inputs unless you want to plug something into the front panel optical input.