While I broadly agree with your assessment, there are two factual errors.
1) "Composite cables" is not the term used for audio. Just say RCA stereo audio cables. For people using AppleTV to HDTV using HDMI, they don't need anything but HDMI cable. Still only stereo though.
2) HDMI audio processing receivers are pretty cheap now a days. About $400. Check for Sony 910, Onkyo 605, H/K 247, Yamaha 661, etc. These are low end receivers but they process multi channel audio through HDMI including PCM 5.1 (some 7.1). I prefer the H/K sound (I own a H/K 745).
Yeah, yeah I know. But most audio cable packaging reads "composite", so most people who are connected to RCA audio inputs and think they have digital surround call them composite cables.
Sony, blech. I checked the Onkyo and can't find anything definitive indicating it's more than a switch, but I'll take your word for it. Plus it's 7.1 90 watts/channel, both of which are pointless in most listening spaces, so I'd feel like I was wasting money.
And you gotta tell me why the H/K 745? For the video processor? I mean I like the H/K sound just fine, but unless you just bought the thing recently after the price has dropped way low, for the $3,000 you would have paid not too long back, you're starting to head into Sunfire territory. Which of course no one can really hear the difference in Sunfire equipment, either, over a cheap 5.1 Onkyo, but at least you can say you own Sunfire, like owning a Lexus or something.