Direct/Bypass:
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This means that the signal bypasses the DACs and no processing at all is done. The signal is sent straight to the amplifier or in the case of a preamp straight to the analog outs. So yes, you will need analog audio cables to use that mode.
On cables:
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Component video and digital coax audio cables are identical. Either will work for either application. By definition a component video or digital coax audio cable is a 75 Ohm cable. Composite video cables are all 75 Ohm as well and will work as digital audio or component video cables too.
Strand count, type of jacketing, shielding, etc are 'quality' factors and I would not worry too much about it. As long as they are reasonably well constructed and not flimsy they will be fine. Good connectors are important though.
Component video/composite video or digital coax audio cables will also work for analog audio. Analog audio cables are often 50 Ohm, but not always.
Analog audio cables that ARE 50 Ohm will likely still work just fine as component/composite video or digital coax audio cables, but they will not technically be the 'right' cable the spec calls for and so you really should not use them for video or digital audio.
I do think its good to buy cables that are specifically marked component video, digital audio, etc but only for the fact that they are color coded according to the thx spec; ie, red/green/blue for component, yellow for composite, orange for digital audio, purple for sub, etc. While the color obviously has no affect on the sound, it does make it easier to tell which is which while you are behind the rack (in the same way that green is for your keyboard and purple for your mouse on your computer).
Just buy decent quality 75 Ohm cables and all will be well.