Vinyl pressings, especially of more recent material, have greater dynamic range than their CD counterparts (because of how they mastered the CD release, not a limitation of the medium).
Many vinyl collectors and audiophiles claim vinyl is technically superior, but it's not. It is worse than unfortunate that the vinyl pressings often sound better than the CD.
In regard to using the analog connection vs. the digital one, it depends on the situation. I typically find that digital connections are less of a hassle, especially when dealing with the same tier equipment such as the Yamaha CD player and receiver discussed here in this thread. Technology revolving around DACs is pretty much beyond necessity in terms of intelligible differences. Their implementation could become relevant in certain circumstances. You could put a great DAC inside of a cheap CD player with piss poor line level output (maybe something in the analog output adds noise, or the voltage is too low or high) and the result would be poor performance. This sort of problem should be rare, but it does happen.
Because the connection is analog the possibility of audible interference is more probable. Analog signals are more effected by electromagnetic interference and AC noise. Usually if the player is of sound construction and the cables are 75 ohm, sheilded, and of good quality, the possibility of interference is significantly diminished.
Each analog stage adds noise to the signal path. If the SNR (signal to noise ratio) of the CD player and receiver are both very low, you may not experience any problems with stereo hiss at the listening position.
Digital connections can too suffer from interference, however it is less likely the effect would be audible. Coaxial digital cables should be 75 ohm and shielded, exactly the same as composite video and subwoofer cables.
Functionally there is no difference between using the digital connection or the analog connection because the digital to analog conversion process is going to take place either in the receiver or the CD player. Basically, it has to happen because the amplifier is analog (like all amplifiers, even the ones that claim to be "digital"). Some will debate that because there is a smaller power supply and less electronics overall inside the CD player in comparison to a receiver that you should use the analog outputs. Others will argue that the motors inside the CD player can introduce noise in to the signal path and degrade the analog output so you should use the digital output to connect to the receiver.
Basically it's a hairy mess with no definitive answer. You will just have to try both for yourself and see which works best for you.
In regard to your concern for 5.1 and 7.1, unless you have DTS CDs (hardly anyone does) then you need not worry about that. Pretty much all CDs you can buy are 2 channel only. DTS CDs are extremely rare and typically are special order items. In fact, I don't even know if they still make them.
