I bought a Digital to Analog Converter (DAC) for $59.95 to convert optical audio (via Toslink) to RCA analog stereo jacks. Device I purchased was a DAC-2016 S/PDIF to Analog RCA cnvt. Very compact! Also, bought a Belkin Toslink cable for $19.95 at the local Apple Store. Works perfectly with my HDTV that only has DVI and Component inputs (plus coax, component, etc.) I just bought it last month. Googled it a minute ago. Price seems to have gone back up to $89.95. (List price is $99.95.) Not available right now. Maybe Apple TV caused it to sell out.
Let me know if any of you can find this item in stock anywhere or have another solution. I have a friend who has an older HDTV with DVI inputs.
iPad-3G 64Gig & MacBook Air 11", Mac OS X (10.6.6), iPad processor and iPhone 4/iPad OS 4.2.1