When using and Optical Cable for surround sound with a PS3, is it better connecting it to the PS3 or the TV?

Optical to your Surrond sound from the PS3 and HDMI to the TV. This is how i have mine hooked up and gives you the best results. HMDI to TV gives the 1080p or optimal resolution and the optical from ps3 to the surround sound gives you the surrround sound for games. If you hook to TV you will limit your sound as TV speakers sound like crap for gaming or movies. Plus the PS3 wont output audio from the TV and surround sound at the same time. Recap: HDMI from PS3 to TV and optical from PS3 to surround sound. Make sure you change your audio settings in the PS3 after doing this or you will hear nothing.

the tv

Your TV has an optical out? It must be old too. Normally you will get the best results by routing both sound and video into the receiver, then out to their respective destinations. This allows both to get there at the same time roughly. Also a good receiver will allow you to adjust the delay for the various speakers so that it syncs perfectly with the tv. The video will usually have a bit more lag time getting on -screen than the sound has getting to the speakers and playing. Routing both video and audio to the TV would likely produce a whole lot of lag. You'd have the TV displaying the video at the same time it outputs the audio to the receiver, then the receiver gets it and relays it to the speakers, that would add a few milliseconds and sound bad. Even if you reduce the delay to zero on all speakers. There's no reason you can get good sound with optical.