Hi BJ,
First off, please don't knock the quality of RCA outputs to a 42 or 50" plasma TV and a good surround-sound receiver, unless you've tried it!
Well, I have tried that, at least for short periods of time, just out of curiosity (generally after having the Azbox come up in some video format that doesn't display through the HDMI, to help me get back quicker). It probably IS better than what I used to do before I got my HDTV though. I still do a LOT of SD, and record both on my computer HDD and also on my TIVOs.
Before I got my HDTV though, I used to play HD channels on my computer, using a program that cut the HD screen dimensions in half, effectively turning it into SD format, and then ran the screen output to my TV via an SVID output of the computer's graphics card. I could record this on my TIVO in SD format, or on my computer in HD. I can understand the desire to save disk space by saving in SD format, as I have a stack of HDDs which are full of HD content. Doesn't take much to fill them up. But I guess once I got my HDTV, I got spoiled, and if the source is HD, I prefer to watch and or record in HD, despite the file size. But that's just me.
Second, you keep saying the AZbox is expensive. Actually, it's the cheapest of the "respected" DVB-S2 receivers: Pansat 9200 was about $600 with the -S2 board, Dreambox is $500, but AZboxes start at $295.
As far as "overkill", if you want to watch DVB-S2, you'll need one of these receivers whether watching HD or not. If you want to watch/record HD channels, you need an HD receiver whether you're watching them in HD or not.
I guess I am still surprised at the concept of having an HD feed, and choosing not to watch it in HD, but you're right about the Azbox being a good deal compared to other STBs. I think my thoughts when I called it expensive though were comparing it to a computer based receiver that you can get for a third the cost of a STB. I say that even though my current S2 PCI card (TT3200) isn't too reliable, but I've ordered a replacement. I guess it's a few extra steps, but to save space, you can reprocess the .mpg files and turn them into SD. I generally reprocess most of my recordings anyway, to trim the beginning/end.
Another thing I did, prior to getting my HDTV, was to get a ROKU HD1000. The ROKU has ethernet input from my computer cards, and has either component (HD) or SVID (SD) output to the TV. I could run the SVID output to my TIVO, or to a VCR or another recording device. It also has L/R RCA stereo audio, and the ROKU could do a stereo downmix of AC3 audio. After I got my HDTV though I switched everything over to the component output. The problem with the ROKU though was that it doesn't do MPEG4 or 4.2.2, so I got a PopCornHour, which does mpeg4 and at least SD 4.2.2. The PCH has both composite and component video output with R/L analog audio, as well as the HDMI digital output. I've never tried running it's R/L/V outputs to the TV. Of course, the combination of the cheap S2 card and the PCH is getting up in the range of the Azbox, price wise, but the extra capabilities make it well worth it. For playing back recordings, I use all three, ie the Azbox, the ROKU and the PCH. Each has it's good points and bad points.
There's no easy work-around for needing analog stereo outputs, if the analog outputs are mono'ed.
Well the famous Sonic Voom thing seems like a fairly cheap workaround, but yeah it would be easier if it worked out of the RCAs to begin with. I really wonder though, if it's a software flaw that can be fixed or a hardware issue that can't be fixed via a firmware update. Ie there are lots of devices out there that only do mono. Maybe they made a decision based on what they thought the consumer would want, but I guess that's unlikely.
You also mentioned SYNC relative to the different audio streams from different receivers. Sync has been my biggest issue, and the reason for my buying about half of my hardware, including the Azbox. Although MY sync issue is trying to get the video way OUT of sync. I like to watch one particular NFL team's games, however I HATE the network commentary, so I like to listen to the home team Sirius radio audio, turning off the network audio. Problem is, that the Sirius audio is delayed about 25 seconds. What I did, back when CBS had 4.2.0 video, was to stream the video from my computer to the ROKU, but hit pause on my ROKU for 20-25 seconds to sync the video with the Sirius audio. This worked perfectly. Once CBS switched to 4.2.2, however, I can no longer do that, since the ROKU doesn't do 4.2.2, and while my PCH does 4.2.2 for SD, it doesn't work on HD for some reason. So that's when the Azbox came in, ie it can play live HD 4.2.2, so I assumed that it would eventually be able to play HD 4.2.2 streamed from my computer. Unfortunately, after well over a year of waiting, and the Azbox still can't play high bitrate either from recordings or streamed. So I've been in a quandry over whether to watch HD from the Azbox, and have to put up with either network commentary or 25 second delayed audio, OR to watch a SD feed that I can easily delay via my TIVO. So far, I have usually chosen to watch SD/Sirius audio. However THIS thread has gotten me interested in the possibility that perhaps your method of using the composite video output, feeding that into my TIVO to delay it, then spread out the video on my TV might be higher quality than the DirecTV-SD-->TIVO that I've been doing. Of course, since I'm not using the network audio, the lack of stereo won't bother me at all.
BTW, delaying high bitrate HD for 20+ seconds requires quite a huge buffer on my computer. I think I set the buffer at something like 140 MB, and I'm still on the edge of things breaking down, but usually it works perfectly, at least on the non-4.2.2 feeds. Still works fine on ESPN signals.