If you are planning to use the HDCD decoding, you need to run it analogue. Very few receivers have HDCD decoding capabilities. It is also very difficult, if possible at all, to detect audilble differeces consistently between digital-to-analogue converters. I do not think you are experiencing a problem. What was it you were expecting to hear??
Dedicated CD players tend to sound better than dvd counterparts with CDs. However, some DVD/CD players have twin laser pickups, one for DVD, one for CD. Those can be excellent sounding pieces.