Doh! I just double checked my Onkyo, you are right. No optical. Sorry about that. The optical jack I noticed was on the old DVD player (my bad). Things are starting to blend together in my memory these days.
Why don't you just stick with a component video hook-up? I'm not sure what the PS3 comes with cable-wise, but I just purchased a component cable for my PS2 (same cable works on a PS3 according to the packaging) for $20.
Amazon.com: Playstation 3 Component AV Cable:...
Then you shouldn't need a DAC, right? and your picture quality would be very, very close to if not equal to HDMI.