Welcome to the forum!
I like the Onkyo 506 unit. I've recommended it a few times. FYI, Amazon generally has good prices on it. At the moment, it's $202 in black and $203 in silver. They've had it as low as $180 that I've seen, and they'll price match themselves within 30 days of a purchase.
The best way to connect your DVD player to that unit (or any similar receiver) would be with either the optical or coax digital audio connections. I prefer coax because I think the connection is easier to make (round RCA connector versus keyed connector), especially if you're reaching behind the unit when it's in an entertainment center. Either one will sound the same, though.
Upgrading for HDMI audio processing...hmmm. That's more of a convenience than anything. With the Oppo, you only have to run one more cable (optical or coax) in addition to the HDMI to get the best audio with the 506. If you step up to Blu-ray or something else with the new lossless surround sound codecs, I don't think that the optical or coax lines have the bandwidth to handle those. So, you would want to use the 7.1 analog inputs on the 506 versus a single HDMI cable on the 576. I believe that you could get the same surround sound either way, but you would need to run more cables with the 506.
[Somebody please correct me if I'm wrong about optical/coax not being able to carry the new lossless surround sound signals. Thanks!]
Adam