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Actually, it doesn't have ANY digital outputs. Just what do you require one for? Name specific models and functions when replying.
Do you think the TV NEEDS optical audio from the receiver? Maybe the TV could survive on just analog audio from the video source, while the GOOD audio goes to the ARCAM since the ARCAM is going to do the hard work of managing and driving the REAL speakers.
Seems you set it to "Stereo Direct" mode. This is an analog only mode, while you are using a digital signal. You can change this with the mode button.
Press menu, on the main menu screen 1, scroll down to stereo direct. Turn this OFF. This should solve your issue!
Your 635 will not display the OSD screen through component. You must use either s-video or rca. It won't upconvert the screen menu this route.
I had one up until a week ago. There are two outputs on the back specifically for the OSD screen. I used a separate old 13" TV with s-video to do my setups. Hope this helps.
I had this same problem with my Arcam AVR300. I ended up shipping mine to an Arcam repair center and they repaired it and shipped it back for under $200. The problems were cracked connection on the start relay and they replaced power supply diodes. Very well worth it and now I can enjoy it again!
The problem might be that the set can not handle the change in signal. Try setting the AVR-247 to 720P first then turning on the set. Or manually set the TV to receive 720P then change the AVR. TI believe that you have a connectivity issue where the two units are not speaking the same language at the same time. Update this with your results and please post the TV make and model.