Indeed sir you are correct! I checked my manual and there are 2 Coax inputs. I think a trip to the store today for a coax cable is in order. Well this will at least keep all my sound digital until the DVD hardware I am looking for comes to market. I can't see spending $900+ dollars on an upscaler when someone will no doubt come out with a 400 disc blu-ray. I just hope that it will be from a reliable manuafacturer. Then comes the daunting task of deciding upon which new receiver will sit in the cabinet for another 10+ years until it too becomes obsolete, but that's another thread for another day. Thanks again for the advice from all. The $600 I was ready to spend for the yam 863 can now be put towards better use. One last question if you don't mind , the Sony 777ES has an internal setting that allows output at 4:3 or 16:9 for larger screens. Originally I used the 4:3 but then after purchasing the LCD I switched it. Could that be a source of the distortions?
What kind of distortions are you talking about? If it is
stretched, then yes, that could be the cause, depending on how the Sony processes things. I have not read its manual, so I cannot say definitively. But if you mean "graininess" or lack of detail, then probably not.
When you get a Blu-Ray player, you might want to consider buying that Yamaha RX-V863 anyway. Your current equipment cannot decode all of the audio formats that are on Blu-Ray, but the Yamaha RX-V863 receiver can. Since I believe your current receiver lacks multichannel analog inputs, you cannot simply buy a Blu-Ray player that decodes everything and sends it out via multichannel analog. So you might want to hang onto that money you had reserved for a new receiver, rather than spending it on something else, as you are likely to want to buy a new receiver when you get a Blu-Ray player.
But, I recommend that you wait to buy a new receiver until you buy a Blu-Ray player, because they are always adding new things and making improvements, and if it is a while before you get a Blu-Ray player, Yamaha may have come out with something better by then for the same price.
For good value in receivers these days, I like Yamaha and Pioneer. Of course, it may be different next year, and it also depends upon the particular deals one encounters. But I have liked Yamaha in this for a long time, and have purchased Yamaha surround receivers for my last two units. (Before that, for my very first surround receiver, I had a Carver receiver, which was "DD ready", to which I later added a Sony DD processor, because I got a very good deal on it.)
One other thing: I have not looked at the manual for your receiver carefully enough to know, but with most of them these days, you can "reassign" a digital input for use with something else, so that you might be able to use all three of your digital inputs for different things. Certainly, though, you can use at least two of them for different things, and you could probably plug into all three even if you cannot "reassign" the inputs, and just have one of the input devices on at a time for the "DVD/LD" input. After all, you only will be listening to one thing at a time anyway.