Yamaha RX-Z1 Hook-Up

[NVR2L8]

First time poster with what I hope will be a short list of questions.

I currently own a Yamaha RX-Z1 A/V receiver. I'm very happy with it but it is becoming out dated with the introduction of HDMI.
I'll list what I own and what I'm attempting to accomplish. So, here goes.
1) Yamaha RX-Z1 a/v receiver
2) Sony SD-500 Blu-Ray dvd
3) Panasonic TH-50PZ750U plasma tv
6 Speakers: 4 Paradigm in-wall speakers 1 Mirage Center and 1 Mirage powered Sub BPS-150
Basic questions
#1 By-pass the component hook-ups on the RX-Z1 and just use the Audio portion or use the component hook-ups as well?
#2 The Sony dvd player has an optional (5.1) ch hook-up, pg14 in the manual but I don't see anything like that on the rear of the Yamaha a/v. What I do see on the rear of the Yamaha is something called an, External Decoder, pg 32 in the manual. I don't know what that "External Decoder" actually is. Can it be used for the 5.1 ch hook-up on the Sony dvd player?
What I'm after is a clear direction to take, sound quality and video quality with the available options at hand. It's a bit overwhelming for me, since I am not as knowledgeable.
Any input would be appreciated, Thanks.

 

[Johnd]

Ok, firstly, component is for video only. If you have only one source, it is best to connect the video directly to the display rather than through the receiver.

Secondly, look for a set of 8 rca connections in the back marked ext. in. That is for analog multi channel (audio) hookup, and you will be able to pass many things (Dolby, DTS, 5.1, 6.1, 7.1, DD+, True Dolby, etc.) through those connections with the proper source.

Finally, read, read, and read. Here is a good starting point:

http://www.audioholics.com/education/frequently-asked-questions/

There are many other basics questions answered in that area, just keep scrolling. Hope that helps. Cheers, John

 

[NVR2L8]

John,
Thanks, will do.