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To connect your HTPC to the receiver you would need one of these

EDIT: I probably used a bad site (that I deleted) to show what kind of adapter was needed, so it is a DVI male to HDMI female.

It could be worth looking at your local bargain store for this adapter as shipping fee is often killing the deal.

Then I would suggest connecting the receiver to TV using the component connection.

For the HDFury, I did a quick research on internet and found one for $200 !!!
For me it is a rip-off.
 

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Sorry, I forgot about the downconversion, but I think you are trying to overshoot with that HDFury thing. The max resolution for your tv is 480p.
What source resolution are you playing from the HTPC? If sources are 480 you do not need to go to HDMI and then reconvert to 480 with the HDFury. That money should be save to update your tv set if you want to play higher definition sources.

So I would use the s-video out from the pc and component from your receiver. Or as you said, continue using the vga connection and audio through the receiver.
 

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Looked at the spec for your TV and native resolution is 480. VGA resolution is 640x480, any other resolution will be compressed to fit this size.

Component link will be equivalent to a vga connection and allow you to use your receiver to manage all your sources.

I am not saying that your tv is no good; I am just saying that if you want higher resolution you need an other tv to have more pixel. HDMI link with an HDFury does not add any pixel to your tv.
 
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