Pioneer Elite BDP-05FD

Hello, I have the Pioneer Elite BDP-05FD. When I hooked up this player to my receiver and to the TV, I getting very grainy and fuzzy picture quality when using HDMI connection. Watching blu-ray movies looks great but NOT regular DVD movies though.

If I hook it up from the player to TV, it might improve picture quality. But the problem is that I can not get DTS-HD Master Audio if I am not using HDMI cables correct? Can I still get DTS-HD Master Audio sound format if I am using either coaxial or optical cables?

Thanks for any advice!!!