Strange someone just asked this question, so I'll use the same response
Well the only main reason to do it is source switching. It's easier to plug your cable box, xbox, dvd player, vcr, etc. into your reciever and have one cable going to your TV and press a button on the remote to change the video and audio source than it is to plug the cable for each one into your TV when you need it.
As far as the using S-video in to component out, I don't think that's possible, mainly because the s-video in's are all on the same switch as the s-video outs, I don't think the s-videos and the components are connected. It would be like having two routers that aren't connected and trying to connect to a computer on the other router, won't work. Upon thinking about it, while the above may be one reason, you would need a converter to change the s-video signal into a component signal, and I don't think too many, if any, recievers have that. You can buy converters I believe, but it won't do you any good I don't believe since the source was s-video, and how many TV's have component, but not s-video inputs.