Sky box ---> Red/White/Yellow ---> Onkyo ---> HDMI ---> TV.
If your parents think they're getting ripped off by not getting 5.1 surround sound while watching Sky, then set the Onkyo to simulate surround sound every time they switch to the Sky input. If not, just keep it on 2-channel and leave it well enough alone.
If they have the TV set up to also utilise its UHF Freeview tuner, then sure, buy a coax cable so they can listen to Freeview through their speakers. Otherwise, don't worry.