Best way to hook up my blue ray player.

With the caveat that I'm not familiar with your gear (other than the TV), that's exactly how I'd do it. Simply put, this way involves as few components in the chain between the source and what the next component does best: TV gets the straight video feed, and reciever gets the straight audio feed. Full stop.

Yet, there are some other benefits in my view. First of all -- again admitting that I'm not familiar wiht the Rotel -- it's not an unreasonable bet that it's HDMI video switching isn't up to par with a straight feed to the TV. Why bother passing the video through the Rotal at all? I wouldn't. Second, at least in my setup, there are plenty of times when I (or more frequently my wife) just wants to sit down and turn on the TV and watch something (be it cable, a DVD, what have you) without firing up all the additional components to make the whole HT system go. HDMI straight from source to TV gives you the whole shooting match, no extra buttons or nothin' (particularly when you're talking about a handful of non-remote monoblocks that you have to go for a walk to make go in the first place). So, at least for me, it's a no-brainer and how I route all my sources.

Now, if you have a TV with fewer HDMI inputs than you need (which you likley don't) or a video-capable-HDMI-switcher that is up to the task and multiple HDMI sources (which you might), then, by all means, run everything through the receiver. Opinions may vary, and I expect there's no right answer, but that's my two cents.

The only way you can get DolbyTrueHD and DTS HD Master Audio is through HDMI cable as it stated in your Blu-Ray player's manual. The way you have connected right now, you're only limited your Blu-Ray audio out put same as a regular DVD player. Your Receiver does have HDMI out, so the proper way is running a HDMI from your Blu-Ray player to the Receiver. From the Receiver HDMI out to TV. I would turn off the TV's speakers, because you're only needing the Video not Audio from your TV, your Receiver doing the reproduction for sounds, and your TV is just for pictures. You're get the very best of both world.

Well pretty much if your receiver up converts like the new receivers do; you won't lose any pic. quality using that method.--cable box to receiver.
However this way you have to turn on your rec. just to watch the news.
So, If you have some component cables you can do the 3cables for video and the red/white for audio;you'll get a pretty good picture for watching the news on the component input for the tv.
Then if you are watching a movie on cable you can use the HDMI thru the receover and back to the tv on an hdmi input with your receiver. That way you get the best when watching movies.