I've found optical cables sound better than analog cables because there is less background noise. I've heard that toslink cables can have some problems with phase distortion but I've used them and not had any trouble.
Hello spider_duggan,
There are technical differences between DAC designs, but whether this has much bearing on sound quality is open to question. I'm sure I've read posts here that say that double blind tests show that CD players are indistinguishable from one another. The main reason for having a DAC in an amplifier is to sort out the Dolby Digital/DTS signals, use the subwoofer (this is done using a digital filter), and use DSP effects without having to do an unnecessary analog to digital conversion step, i.e. CD player does a digital to analog conversion, then the amplifier has to do an analog to digital conversion on this signal to filter it (say, if using a subwoofer) then it has to do a digital to analog conversion to output the sound. In most instances the analog to digital conversion step is more degrading to the signal than doing an digital to analog conversion.
You could say that the amplifier has to be good at interpreting digital signals sent through a toslink/electrical digital cable and the cable itself must be good in not distorting the signal (group delay etc.), but I doubt whether these have much bearing on sound quality.