Hi,
i have a very similar setup and the answer is yes you can.

i have the sky+ connected to the LH-RH361SE via scart. Video options in Sky+ picture settings are set to RGB. Scart cable is a fully wired one from the TV SCART socket on Sky+ (dont use the VCR SCART socket as that is a composite output not RGB) to the AV2 input on my LG (only because I have a media streamer plugged into AV1
The LG is then connected via the HDMI cable to the TV (in my case a 32" Toshiba LCD).
The LG does upscale the RGB to HDMI and the result is very pleasing on the eye. It also means that you can just leave the TV set to HDMI whether you want to watch sky or play a DVD. You can also record DVD from the Sky+ very well.
I dont have any audio coming out of my TV, the LG handles that for me.
I have been experimenting with using the Optical audio output from the Sky+ but then you are limited to using AV3 optical on the LG and that is a composite input only, not as good as RGB. Been asking a few questions on this forum and no one seems to know a way of being able to use AV2 and otpical in at the same time.
So, in short, yes it will be fine. RGB scart from Sky+ to LG and HDMI to the TV works wonders. Does mean that LG needs to be on whenever you watch sky though as it doesn't pass through RGB to HDMI unless when switched off (on standby that is).
Once you have it setup, try alternating between PAL and RGB on the picture settings window on the Sky+ box, the difference is very noticeable. RGB gives nice crisp menus, composite video makes them a bit fuzzy around the edges.
How do you find your LHRH361? I think its OK but missing a few features, it could certainly do with a freeview tuner rather than analogue. But then it does have some plus points, like upscaling RGB to HDMI.
Jules