I don't think your connections are wrong (but I personally prefer to route everything through the receiver for easy switching despite the fact that I could set up macros).
HDMI holds great promise that IMO has not yet been achieved. Although it is capable of carrying both high resolution video and audio at the same time, it often doesn't because the device manufacturers often don't implement the audio portion. It will be a requirement for HD DVD but by the time that becomes mainstream the industry will be moving forward to NGMI (Next Generation Multimedia Interface). Ok, I made up that acronym but bet the bank on it - before HDMI becomes mainstream and is available on low cost devices sold at WalMart, the industry will be touting the next big thing.
IMO, the only thing HDMI buys you is the ability to use one cable for video instead of 3.