Picture quality will be unaffected and the "blue edition" works. The other solution might be to just run component and save the $150 bucks.
+1 with this suggestion. Component video although analog provides a very clear picture, much better I would guess than running through a seperate VGA converter. According to page 25 of your receiver's manual,
■ HDMI Monitor Setting Set to No
With the HDMI Monitor setting set to No (see
page 47), video input signals flow through the
AV receiver/AV amplifier as shown, with composite
video and S-Video sources being upconverted
for the component video output. Use this
setting if you connect the AV receiver/AV amplifier’s
COMPONENT VIDEO OUT to your TV.
Composite video is upconverted to S-Video and
S-Video is downconverted to composite video.
Note that these conversions only apply to the
MONITOR OUT V and S outputs, not the
VCR/DVR OUT V and S outputs.
The composite video, S-Video, component
video, and HDMI outputs pass through their
respective input signals as they are.