I know that the PS3 was updated to output over hdmi and other audio source at the same time, what I am not sure about is whether that is optical audio only, or does it include the analog audio on the standard PS3 cable/connector?
Exactly right. That's how I'm using my PS3 now, got a surroud sound system hooked up using a 3.5mm stereo to Red/White phono adapter, which goes into the supplied Multi-AV Connector (reason being they're PC speakers so they don't have a 5.1 decoder built in, so no optical unfortunately), video coming through HDMI.
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