I missed a sound option here, it just occured to me as I read the post anew. There is also an spdif connection on both models that is optical out for sound. Because the WDTV doesn't convert DTS on the fly like the WDTV Live does though, its spdif connector has to go to a receiver for your home theater that has an spdif in and can convert the dts to analog for play through your speakers. With the WDTV Live though all you really need is the HDMI which will transmit both video and audio on the same line. Thats what I have, the WDTV Live and its only connection to the TV (a Samsung SyncMaster 2333HD tv) is the HDMI cord, and I can play MKV AVI and even iso's from the connected usb drive to the tv and I always have sound (although I do not use the tv's speakers, they suck, I have a 2.1 logitech set plugged into the tv's phones out connection for my sound)
Another point I should make is there are two usb ports on the mini device and the directions say to use the back port (only) when just one usb drive is connected, and only use the side port if you have two drives connected at the same time. Also you can update your firmware with hacked versions or the official stuff from the WD site, but to do so you have to put the files on a usb stick and remove all other usb devices and put the stick in the back port. Then when you start the device it will see the firmware and ask if you want to update. All this info is in your manual and even more info on the WD forum site. Your probably better off there to get your info than from me or this forum.