Right. So if he uses the hdmi xbox ->tv he won't loose hdr. The optical goes tv -> receiver. Then all tv audio comes from home theater receiver / speakers. Low cost solution that preserves hdr for video and sound from home theater.
the tv optical is for output only
The one thing I'm not sure about is whether or not the tv -> receiver connection will preserve hi end audio such as dolby surround surround or will it only transmit 2.0 stereo audio. If so I might try setting the optical cable to go xbox -> receiver and see if any advanced audio features return.