It works!!!!!!! So I was able to get it going again this morning through my reciever with optical!!!!!!! I was reading another thread about others running into different problems. Their fix was to connect to Mac and completely reset. I did a few resets on the device itself with the same outcome so I thought why not give it a shot.
First, I did not even know you could connect the device itself to an machine but you can.
1. I connected the ATV2 to my MacBook Pro using a mini USB (in back of device) to USB cable
2. Unplugged all other cables incuding the power
3. The device was then recognized in iTunes and it gave me the option to reset it, which I did.
4. Let that run and reconnected all cables once the rest was complete and wouldnt you know it, I have my optical back again!
In the other threads, others stated that Apple stores have been telling folks the new firmware update for some reason has been getting hung up and they have been doing this type of reset in the store with much success.
So, give this one a shot and see if it works for you too. I belive it will also work with a PC as well. In addition, I do not hear any noise in my feed (but there can be many different reasons for this; cable type, cables adjacent to optical, receiver type, etc...)