thanks for all the informative replies.
toyota89- yes picture quality isn't the number one thing in gaming but when you spend $3,300+ on a top of the line system, you want to show it off the best you can. Especially on the holidays.
jalan- their audio cables are horrible, they're more known for their video cables. When I went from an S-video connection from my digital cable box to the dvi connection... it blew me away how big of a difference I saw.
chrisF- your post was the one that talked to me most. I did some more research and did find that you're right, you do need to buy the optical sound cable and adapter sepperatly, I've never even seen them in a store. now that would still be good except my older, smaller hdtv (which will house the xbox for most of it's lifetime) doesn't have an optical sound input. This makes it basically a no brainer for me now.
Thank you everyone and Happy Holidays.