I may be missing something, but I don't think that it's so complicated.
ikandari, you have almost everything set up. The one change that you need to make is that instead of running the audio cable from the DVR audio outputs to the home theater audio inputs, you would run that audio cable from the TV audio outputs to the home theater audio inputs.
That way, you would select between watching and listening to the DVR or the blu-ray by selecting the different video inputs on the TV. Keep the home theater set to TV/VIDEO for those two sources.
I don't see anywhere in the TV owner's manual where it mentions having trouble converting HDMI audio to a stereo analog output, so I think this will work for you.
Because you are using a stereo connection to the blu-ray player (through your TV), you won't be getting true 5.1 sound (as the others have mentioned). You could certainly buy something new and get better sound...but that's true for all of us here.
I'd sure appreciate it if you would update us and let us know if this worked for you. Thanks!