I don't have the 360 Elite or of the PS3, but you should look into the console settings for audio/video. You should be able to tell it to output via digital optical audio instead of sending the audio signal via HDMI.
I recently bought a PS3, 360, and a new HDTV (32 in Sharp Aquos, the one with 1080p) as well as previously having a Bose Lifestyle 28 surround sound system. I was looking for a way to hook my PS3 and 360 up to the surround sound system, and was told that a digital optical cable would be the best route to take. Both the PS3 and 360 are connected to the tv using HDMI, but my Bose receiver does not have HDMI inputs. However, when I connect my 360 and PS3 to the Bose receiver using the optical cable, it will still not output on the 5 speakers, only the tv puts out sound. Do you guys have any advice as to how I can make this work? Sorry for the long explanation, but I really do not know what I'm doing here, and any help would be greatly appreciated. Thanks in advance.