Michael, this is Sky+, not SkyHD so no HDMI output on the box.
Simon - your TV will be upscaling the picture from the Sky+ box when it receives the RGB Scart signal. So it would be a question of whether the TV's upscaler was so poor, that by dropping down in quality to the S-Video connection and using the Onkyo to upscale instead, you would get a better picture. I can't say for sure as I don't know what TV you have, but the scaler in the Onkyo 606 is nothing special, so I would think you're better off as you are.
EDIT - sorry, just realised I read the wrong person's sig and read you had a Sony TV when actually it doesn't mention it! Which TV do you have?