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I got the PS3 also.

I have it connected with HDMI because HDMI is 100% digital so you get the exact signal from the PS3 and Blu-Ray with 0 degradation. It looks perfect!

In my system, I have the PS3 sound set to Toslink because I want to use my old Yamaha Audio Receiver to get the Surround Sound. I have several other HD sources, Cable Box, Video cards and have it all connected to my HD Monitor via a HDMI switch.
This one also has 4 Toslink Audio inputs that allows me to switch to my AV receiver so I can get Surround using my old AVR.
 
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