Hi Zoombini,
Firstly the S-Video connector does NOT carry audio, so you will need to use the RED and WHITE Audio leads. But as stated earlier, DO NOT connect the yellow lead aswell (This is the composite video).
Secondly in terms of quality of picture, S-Video is far superior than composite (single yellow). RGB is supposed to be even better than S-Video, but on my 32" Sony, I've done many comparisons, and I personally can't see much in it! (If you only have 1 RGB enabled scart, I'd keep this for your DVD player)
One further point - If you use you deceide you want to connect the x-box to one of the rear panel scart connectors, and you buy a S-Video to Scart adapter (which also allows you to connect the Red & White Audio leads), you may need to go to one of your TV menus and select S-Video on that scart socket, as I'm sure that the RGB and S-Video signals share some common pins).
Good Luck and stick with it, because you will reap the rewards!
Zorilla
PS: The standard scart AV cable I think only carries the video in Composite - hence why you should definately get the S-Video working, as it should be much better. For Scart pin out try:
http://www.daveladd.demon.co.uk/pscart/scartpinout.html