All connections fine, except you also need an optical (or electrical depending on which Sky HD box you have) digital connection from the Sky HD to the Denon. Sky only sends stereo over HDMI, so you need an additional link for surround.
You need to make sure the Sky HD is set to send Dolby Digital over optical - you do this in the Sky HD sound settings menu - and that the Denon will use the digital input for sound rather than the HDMI. Page 34 of the manual explains how to do this.
Regarding overriding the Audyssey settings, you can go into the manual set-up and tweak the speaker distances, levels and size settings – the manual explains how to do this starting on page 25.
EDIT: Those page numbers from the US manual, which is the only one I could find online, so may be different in UK manual. We'll try to dig out the manual and I will amend; in the meantime you need the sections headed
Changing the Input Source's Input Mode and Decoding mode (Input Mode)
and
Making detailed settings (Manual Setup)
respectively.
To set the speaker levels manually you ideally need a sound pressure meter – this one from Maplin will cost you about £20 and should be good enough – but you can do it by ear if you want.
Ideally you want the same level from all speakers, but I have found the Audyssey system tends to set the rear speaker levels a bit high for my taste, and so I tend to turn them down a bit.
Also worth checking the distances, and changing them if they are way out - I had an experience with one amp deciding my subwoofer was 8m away, when in fact it was only about 5m.
Other common errors include setting speakers to large when they're in fact small, or vice versa, and this can be corrected in the manual set-up, too.
Really, it's a matter of getting a sound with which you're comfortable in your room - and of course if you mess it all up you can always run the Audyssey set-up routine again and use that as a basis on which to start playing refining the set-up again.
Consulting Editor, What Hi-Fi? Sound and Vision / whathifi.com
Audio Editor, Gramophone