Dojj - optical shouldn't "crackle" as it's a digital soundsource and is actually light as opposed to electrical pulses. Something is wrong there - either the lead, or the input or output on your devices.

Steve - If your Sky box doesn't have an optical or coaxial digital output then you will never get 5.1 surround sound from it. Red + white RCA's are stereo, the yellow is composite video.

The HDMI from the DVD/Surround will be transmitting the picture from the DVD/Surround to the TV. Does sound come out the TV speakers when you play a DVD, or is it only from the speakers connected to the DVD/Surround amp?

By the sounds of it, you won't be able to have both the TV and the Sky box plugged into the DVD/Surround if the DVD/Surround only has one set of RCA audio inputs (again, this is assuming that the red+white & yellow RCA's on the back of the DVD/Surround are inputs and not outputs) as you'd need two sets to plug in both the TV and the Sky box.

However, if you rarely use the TV's internal tuner (which is most likely either analogue ch1-5 or Freeview) and only watch Sky, then just connect the red+white RCA's from the Sky box to the DVD/Surround.

I take it the Sky is connected to the TV using Scart? If so then you will get audio through the TV speakers from the Sky box over the scart cable, so if you want the audio to come through the DVD/Surround only, you'd need to mute the TV speakers....

Does that all make sense?