The 1st connection scheme is the preferred one (that is, use the AVR as the hub instead of the TV, and maintain only 1 HDMI connection to the TV as much as reasonably possible). Assuming that all your connections in/out of the Onkyo are correct, it's really ODD that video pass-through is not working. I can only speculate that it's either an Onkyo issue and/or HDMI cable problem. Got to isolate the problem by testing with other AVRs or other HDMI cables.
The 2nd connection should be feasible because with ARC, the TV should be able to return audio from all video channels of the TV back to the AVR. My only concern here is to make sure that your HDMI cables are correctly connected, that is, the one designated HDMI ARC port (IN) - usually HDMI 1- from the TV back to the specified HDMI ARC (OUT) port of the AVR, and then any other HDMI between the TV and the WDTV.
Things I would try
1. Disconnect all cable connections first and then reconnect one by one correctly (duh).
2. In order to prevent possible HDMI handshake issues, always turn on the AVR first, ALWAYS.
3. Try to play around with the internal speaker settings of the TV (either via the TV or through the AVR). Sometimes, you have to turn off the built-in TV speaker system to get ARC working.
4. Turn on all HDMI Links Features on the AVR and/or TV.
Best of luck!
WD >>>AVR>>>TV via hdmi = no video ( siguro nga di sya nagpass through which the receiver is capable also)
WD>>>TV>>>AVR = no audio
That is my problem, or am i missing some connections and set-up?