Ideal Home Theater Hookup

[gamer2600]

Can someone clarify for me the ideal home theater hook up? I know there are probably threads on this but hopefully this thread can shine some light on a few questions that I have.

1. Is it better/more beneficial to hook all video and audio into the receiver and then take one HDMI cable to the TV? I have a PS3, and HD Cable box, Xbox 360 Core, and Wii. The cable box and PS3 are already 1080P is their any gain to hooking them up this way or is just cleaner cables?

2. Kind of a part of question 1, but How important is video upconverting through a receiver? I am looking to set up a home theater in the basement of my new house and have read some good reviews on receivers mainly the Denon AVR-3808CI and the Onkyo 805. From what I read the Denon has excellent video upscaling although it can't upscale 1080P over component, so I guess I am out of luck with my Xbox 360. The Onkyo 805 has excellent audio decoding but poor video upscaling.

Any recommendations would be great...I just get sick to my stomach sometimes cause although I love home theater stuff, when it comes time to buy equipment I compare and contrast things until my eyes bleed. Just a little insight would be helpful.

Side note...I read that the Denon AVR-3808CI has some problems when working with the PS3. Did anyone face any of these?

Thanks