My HDTV audio is Optical Out and my DVD/Surround Sound system is Digital Coax In. Would using the Optical to Coax converter linked below retain the quality of the 5.1 sound? CONVERTER LINK
Second question, would using a Coax Y splitter cable to send 2 Coax Digital sources to the same input degrade the sound at all? The two sources (the TV and a separate blu-ray player) would only be used one at a time. LIKE THIS ONE
I'm pretty sure that if you're only going to use one device at a time, you'll be okay. If you try to use them both at the same time, they'll step on each other. An RCA wye cable (as short as effectively possible) should do you fine.
My only concern is that since digital interfaces like matched impedances (75 Ohms for S/PDIF), they could fight each other. I deal mostly with analog audio, though, where the input impedance is usually 10x higher than the source impedance, and this would be a problem there.
I say try the wye as a combiner and see if there's any problem. You're only dealing with 1's and 0's, so there shouldn't be any electrical problems between units...you'll either get good signal or you won't.