I went in to the store after church and bought an optical cable.....but the system I have (950 model) doesn't have the optical port so I will have to return that.
Andrew, I am so sorry! I didn't realize that the owners manual that I had downloaded was for multiple models. I was looking at the back panel diagram for the 1050 model. Again, sorry about that.
From what I can tell, what you need is a powered set of speakers. You are running your video straight to the TV from the PS3 and Xbox, and you can output an optical digital audio stream from the TV. You may want to consider getting a set of 5.1 PC speakers. They make some that are really pretty good. No reason to pay for a built-in DVD player if you aren't going to use it.
You could also look into the Onkyo HTIB set-ups, or even go with some less expensive separates. The Onkyo 505 receiver (last year's model) costs $190 at Amazon. It doesn't process audio through an HDMI connection, but it will pass the video. A decent sub can be had for not too much money - I don't know how good it sounds, but
this Velodyne is on sale at circuitcity.com for $101. That leaves you with a little money to spend on speakers. There are deals on Polk speakers at frys.com every few weeks, and you can find some others that aren't too expensive (including five speaker sets). Just another thing that could be done for about the same money that you spent on your Panasonic.
EDIT: Man, I really feel like a tool for telling you that it had an optical input.