1) What type of digital connection do you prefer? TOSlink or S/PDIF?
S/PDIF. More secure, robust, and the bandwith specifications listed for multichannel/stereo digital processing isn't typically an issue at all.
2) What is the connection type you use with your system? TOSlink, S/PDIF or both?
Both. I use S/PDIF on my DVD Player, TOSlink on my PS2, and my Pioneer Elite PD-65 uses both, although it's more A/B comparison right now.
3) Which connection sounds the best? TOSlink or S/PDIF?
Honestly, S/PDIF sounds better to me. There seems to be less compression, more expansive soundstaging, and overall less grainyness.
4) What types of connection does your audio equipment have? TOSlink, S/PDIF or both?
My DVD player has S/PDIF only, my PD-65 has TOSlink and S/PDIF as well as analog output, my SACD player uses analog and TOSlink (I use only analog Multichannel), the PS2 uses TOSlink, and that's about it