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I just solved this. Yes, Optical input is only selectable on like video 2. DVD is coax with no optical. Why would they do that? It caused me a lot of confusion. Instructions implies to me that you press input select and it offers all the input choices regardless of the video source selected.

Hi, I recently thought to get an optical cable to compare how it sounds with a coax cable with DD 5.1. The cable connects to an HDMI switch that extracts audio to both coax and optical. The coax works good with the Sony. The optical does not work at all, I do see a red light on the cable output...