Everything looks alright with those but here is where I begin to have issues. I want the best and highest quality way to hook up my PC to that receiver. I've read about SPDIF and coax. I have a Sapphire 7850 and have no idea if it's hdmi can carry surround sound. I've read about all the sound cards available and don't want to spend more than 50~ dollars on one. My ultimate goal is to be able to play 5.1 TRUE (not virtual or emulated) surround sound with any game, dvd, song, blu ray that supports it. Can you guys suggest exactly what I need?
Hook up via HDMI from the GPU. You can't get 5.1 out of SPDIF without a soundcard to encode to Dolby/DTS formats, and those significantly degrade audio quality. HDMI from the GPU is the easiest way to go, and offers the best overall quality if the receiver is going to be used.