Steve.
Yes you are correct, however you will need to connect the DVD using a SCART socket initially so that you can read the DVD's menu's to change it to YUV output.
The audio on mine was connected through co-ax, but I know optical is also possible. (Check the other Forum's on the pro's - con's of each), although I don't believe there is a lot in it.
Note you will also need to access the set-up menu's on the TV so that it associates the optical input with EXT4 (the Component input), otherwise you won't get any sound.
Enjoy Christmas with your new set-up!