TV with only optical audio output - OPTIONS?

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lickwidice

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Hi avforums,

I'm new here and I'm still learning about this A/V stuff and I am asking you guys to please assist me. Here is a list of items I currently have:

1) PS51F5500 55" Plasma TV
2) DSTV SD Decoder
3) DAV-DZ270 Stereo L/R IN - has no optical in
    Please note that although this is "5.1", I had all the speakers set up in front of the TV (facing me) and all worked fine.
4) PS3 No HDMI - Using Component (5-RCA)

Basically, my TV only has optical out and I am in need of better audio than these silly 2x10w built-in speakers. I am not an enthusiast and my requirements are pretty basic.

I would like to:

1) Ideally make use of the current DAV-DZ270 system - I've tried to do it using this http://www.hdcabling.co.za/digital-audio-coaxial-or-optical-toslink-to-analogue-stereo-rca-audio-converter-p-346.html but it only works for DSTV but does not work for any of my videos (aac/ac3), I just get a static noise.

2) If I can't make use of my current DAV-DZ270 system I wouldn't mind selling it and purchasing something with an optical in (DAV-DZ350) - If this is your recommendation, please recommend the best bang for buck optical speaker system (I don't need anything fancy. The DAV-DZ270 worked fine for me)

3) I don't think I really need a receiver since I don't plan on expanding any further, but if you guys (the experts) suggest that this is the way to go then so be it, I will need the cheapest receiver that can do the following: 1xRCA (Input), 1xComponent(Input), 3 x HDMI(Input), 1x Optical Audio (Input), 1xHDMI(Out), 1xLeft/Right audio(Out) and 1x(Optical Out). Note the component in is important because if I am spending so much on getting my sound working, then I might as well accommodate my PS3 as well.

Another quick question:

If I have "5.1" speakers and I set them all up to be in front of me (next to the tv). Is the sound basically 2.1? If I'm setting up my speakers like that wouldn't 2 big speakers do the same thing?
 
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