According to the Onkyo 605 manual number 2 is incorrect!
Just to clarify ANSWERS TO YOUR QUESTIONS:
1. YES, YOU HAVE THINGS CONNECTED PROPERLY!
2. THE HDMI MONITOR SETTING NEEDS TO BE SET TO “YES” TO GET ANY FEED TO THE TV!
3. THERE IS NO VIDEO PROCESSING BEING DONE BY THE 605 OTHER THAN TRANSCODING WHICH IN YOUR CASE DOESN’T APPLY!
According to the Onkyo 605 manual, page 24, your no. 2 answer is incorrect. It will still pass HDMI straight through but it will not up convert other sources composite, s-video, component.
From the Onkyo manual:
■ HDMI Monitor Setting Set to Yes
With the HDMI Monitor setting set to Yes (see
page 47), video input signals flow through the
AV receiver/AV amplifier as shown, with composite
video, S-Video, and component video
sources all being upconverted for the HDMI output.
Use this setting if you connect the AV
receiver/AV amplifier’s HDMI OUT to your TV.
The composite video, S-Video, and component
video outputs pass through their respective input
signals as they are.
■ 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.
So if you are correct , then the manual is wrong!