I'm not 100% sure but on a re-read of the manual I think that my AV amp (made by Sony) on its auto setting will automatically switch between its two digital inputs - optical and coax cable - if only one of them is "live"; this would mean that I couldn't have both DVD players running at the same time, e.g. to record on the recorder while playing on the high-definition box, but I really don't think that is a huge problem. I'd greatly prefer to have proper Dolby stereo etc. from both.
Firstly, does anyone know of any reason why this might not work? And second, what's a good reasonably-priced brand for the optical SPDIF cable?