It's digital and as far as I know has all the capabilities of optical or coaxial S/PDIF. Even moreso, as far as I understand HDMI is basically the only way to transmit and take advantage of the newer high fidelity surround sound modes on HDDVD and BluRay discs (as long as both the source and receiving component support them, if not there's no benefit to using HDMI).
I could be wrong on the second bit there but there should be no benefit to going optical unless there is a compatibility issue, they were likely just trying to sell you more stuff.
edit: I think markw might have said it a bit better and probably knows it better than I. My receiver doesn't have HDMI so I don't use HDMI for audio, just video. I'm a little hazy on the details as a result. If you aren't trying to take advantage of the newer audio formats, or can't, then HDMI may complicate things since it still seems to be in flux and a pretty poorly controlled "standard" to me.